FEDERAL COURT OF AUSTRALIA

Hacker v The Owners – Strata Plan No. 17572 [2005] FCA 1936

SUSIE HACKER and NANDOR DADAY v THE OWNERS - STRATA PLAN NO. 17572 & ANOR

NSD185 OF 2005

EMMETT J

20 DECEMBER 2005

SYDNEY

IN THE MATTER OF SUSIE HACKER AND NANDOR DADAY

THE COURT ORDERS THAT:

1.          The application for an extension of time for making an application for review of the sequestration orders be dismissed.

2.          The bankruptcies of each of Nandor Daday and Susie Hacker be annulled.

3.          Nandor Daday and Susie Hacker pay the trustee’s costs of the proceeding.

4.          Nandor Daday and Susie Hacker pay 75% of the creditors’ costs of the proceeding.

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

IN THE MATTER OF SUSIE HACKER AND NANDOR DADAY

REASONS FOR JUDGMENT

1                     On 31 August 2005, sequestration orders were made by a Registrar of the Court in respect of the estates of Susanna Shoshanna Gisella Hacker (‘Ms Hacker’) and Nandor Daday (‘Mr Daday’) (together ‘the Debtors’).  Michael Gregory Jones (‘the Trustee’) was appointed as trustee of the estate of each of the Debtors.  The orders were made on a petition filed on 10 February 2005 (‘the Petition’) by the Owners – Strata Plan No. 17572 (‘the Creditor’).  The Petition was based on acts of bankruptcy alleged to have been committed on 24 August 2004 consisting of failure to comply with a bankruptcy notice. 

2                     By notice of motion filed on 30 September 2005, the Debtors sought an extension of time for applying for review of the sequestration orders.  By the same notice of motion, the Debtors sought review of the sequestration orders and dismissal of the Petition.  The Debtors claim that the Petition should be dismissed because it was based on purported acts of bankruptcy that did not occur.  The extension of time is opposed by the Creditor and the Trustee. 

3                     On 5 July 2004, bankruptcy notice NN 1634/04 (‘the Bankruptcy Notice’) was issued by the Official Receiver under s 41 of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’).  The Bankruptcy Notice was addressed to each of the Debtors at 5 Bareena Street, Narrabundah, ACT (‘the Narrabundah Premises’).  The Creditor alleges that the Bankruptcy Notice was served on each of the Debtors on 4 August 2004 at the Narrabundah Premises and that each of the Debtors committed an act of bankruptcy on 25 August 2004, by failing to comply with the Bankruptcy Notice. 

4                     The Trustee contends that, if the Bankruptcy Notice was not served as alleged by the Creditor, the appropriate course for the Debtors is to apply under s 153B of the Bankruptcy Act for annulment of the bankruptcies, on the ground that the sequestration orders ought not to have been made, rather than to apply for review of the orders, by way of hearing de novo of the Petition.  The particular concern of the Trustee is that substantial costs have been incurred by the Trustee in the administration of the estates of the Debtors, which may not be recoverable from the Debtors if, on review of the sequestration orders, the Petition were dismissed.  In one sense, the Trustee opposes being deprived of the fortuitous advantage afforded by the failure of the Debtors to apply, within time, for review of the sequestration orders.

5                     The Registrar’s orders were made pursuant to s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) (‘the Federal Court Act’).  Section 35A(1)(h) provides that a power of the Court prescribed by the Rules of Court may, if the Court so directs, be exercised by a registrar.  Under Order 77 rule 7 of the Federal Court Rules, the Court may direct a registrar to exercise the power of the Court to make a sequestration order against a debtor’s estate.  Section 35A(5) of the Federal Court Act, however, provides that a party to a proceeding in which a registrar has exercised any of the powers of the Court under s 35A(1) may, within the time prescribed by the Federal Court Rules, or within any further time allowed in accordance with the Federal Court Rules, apply to the Court to review that exercise of power. 

6                     Order 77 rule 8(2) of the Federal Court Rules provides that an application for review of a decision of a registrar must be made within 21 days of the date of the decision.  Order 3 rule 3(1) of the Federal Court Rules provides that a judge may, by order, extend or abridge any time fixed by the Federal Court Rules.  The time may be extended before or after the time expires and whether or not an application for extension is made before the time expires.

7                     There are very sound reasons why the time limits prescribed by Order 77 rule 8 in relation to review of sequestration orders should be enforced strictly.  While there will be circumstances where an extension of time will be appropriate, the possibility of consequences for third parties in dealing with bankrupts makes compliance with time limits in such a context more significant than in some other contexts.   It would not normally be appropriate to grant an extension of time for filing an application for review under Order 77 rule 8 where there has been substantial administration of an estate.  Further, the Court would be slow to grant an extension where substantial costs have been incurred in the administration of the estate.  In any event, before any extension will be granted, there must be a satisfactory explanation for the delay and some indication that there will be substantial prejudice if an extension is refused. 

8                     The prejudice to an applicant from refusal of an extension of time must be weighed against prejudice to other parties who may be affected by the extension.  In that regard, the availability of alternative relief, if an extension is refused, is a relevant consideration.  Further, in considering whether or not to grant an indulgence to a bankrupt, the conduct of the bankrupt in relation to the bankruptcy proceeding may be taken into account by the Court.  The conduct that may be relevant includes conduct in relation to a bankruptcy petition as well as conduct following the making of a sequestration order.  The fact that the debt relied upon by a petitioning creditor is undisputed may also be a relevant factor.

9                     As I have said, the Petition was presented on 10 February 2005.  The hearing date of the Petition was originally 10 March 2005, but it was subsequently amended to 11 April 2005, then to 1 June 2005 and finally to 31 August 2005.  The amendments were apparently required because of difficulty in ascertaining the whereabouts of the Debtors.

10                  Mr Richard Wellmeela swore an affidavit and gave oral evidence concerning service of the Petition on Ms Hacker and Mr Daday on 5 August 2005 in the hallway outside the entrance to an apartment known as 126/6-14 Oxford Street, Darlinghurst (‘the Oxford Street Premises’).  Ms Hacker accepts that, on 5 August 2005, in the hallway outside the entrance to the Oxford Street Premises, she was served with a variety of documents, including a sealed copy of the Petition.  Mr Daday denied that the Petition was served on him at that time or at all.  In an affidavit, Mr Daday swore that he did not become aware of the issue of the Petition, or of its hearing on 31 August 2005, until 7 September 2005, when he received a communication from the Trustee. 

11                  Ms Hacker said that Mr Daday was not present at the time she was served with the documents but that, probably within minutes of being served, she spoke to Mr Daday about them.  Mr Daday confirmed that Ms Hacker spoke to him about the documents on 5 August 2005 and said that, when Ms Hacker spoke to him about the documents, he understood that ‘we were in some sort of trouble’.  He did not recall what he understood the documents to be although he accepted at one stage in the course of his oral evidence that he understood that they were bankruptcy documents.  He accepted that he knew that something had to be attended to promptly.  He left it to Ms Hacker to deal with the matter. 

12                  There were some inconsistencies in Mr Wellmeela’s evidence of identification of Mr Daday.  However, Mr Daday was a particularly unimpressive witness, who made no attempt to cooperate with the cross-examiner when giving oral evidence.  I would not accept Mr Daday’s evidence unless corroborated.  I was also unimpressed by Ms Hacker as a reliable witness, although she made more of an attempt at cooperation than Mr Daday. 

13                  In the circumstances, I am not satisfied, on the balance of probabilities, that the Petition was served on Mr Daday on 5 August 2005 near the spot where Ms Hacker was served.  On the other hand, nor am I persuaded that it was not served at that time. In any event, there can be no doubt that the Petition came to Mr Daday’s attention on that day very shortly after it was served on Ms Hacker, whether or not it was formally served on him.

14                  Ms Hacker said that, upon receipt of the documents on 5 August 2005, she did not understand what a bankruptcy petition was.  She accepts, however, that she read parts of the documents served on her, including the third page of the Petition, which contained an endorsement of the amended hearing day of the Petition, namely, 31 August 2005.  However, Ms Hacker says that she mistakenly read ‘31 August 2005’ as ‘1 August 2005’.  That is to say, Ms Hacker claims that she believed, when the Petition was served on her, that the hearing day of the Petition had already passed.  The signatures and seals on the sealed copy of the Petition served on Ms Hacker may mask the date to some little extent.  However, the date would be clear except on the most cursory of glances.

15                  Ms Hacker said that some time after receipt of the documents on 5 August 2005, possibly on Monday, 8 August 2005, she telephoned the registry of the Federal Court.  In the course of that telephone conversation, she was informed by an officer in the registry that it would be most irregular for a petition to be served after the hearing day.  She accepts that she was told by the officer in the registry that she should search the file to find out what orders had been made.  She made a note in pencil, on the sealed copy of the Petition, indicating that she had 21 days within which to lodge an application for review of any order that might have been made.  She wrote that because that is what she was told by the officer in the registry.

16                  Notwithstanding the information that she was given by the registry, Ms Hacker did nothing.  While she made desultory claims that she was unwell at various times during August, there was no medical evidence to that effect and she accepted that she was well enough to attend a hearing at the Consumer Trader and Tenancy Tribunal in Sydney during the month of August 2005.  It is clear that Ms Hacker and Mr Daday, in the face of serious court documents, and the fact that the day on which they were to be dealt with by the Court had passed, chose to ignore them.

17                  It is also clear that no later than 7 September 2005, each of the Debtors knew that the Trustee had been appointed pursuant to orders made by the Court on 31 August 2005.  By letters of 6 September 2005 addressed to each of the Debtors, the Trustee informed them of his appointment as trustee.  He also required them to provide certain materials, including statements of affairs.  The letters prompted no immediate response or action on the part of either of the Debtors. 

18                  In the days following 6 September 2005, there were several telephone communications between an employee of the Trustee, on the one hand, and one or other of the Debtors, on the other, in which cooperation was sought from the Debtors.  Specifically, they were informed that the Trustee required a statement of affairs to be filed within 14 days from 7 September 2005.  Each of them was informed by an employee of the Trustee that cooperation with the requirements of the Trustee would avoid unnecessary costs. 

19                  Ms Hacker said that, after she received a telephone call from an employee of the Trustee on 6 September 2005, informing her that she was a bankrupt, she spoke to a Mr Gary Neave, a solicitor, who said that he needed $10,000 ‘up front’.  Ms Hacker did not provide any such funds to Mr Neave.

20                  In the week commencing 12 September 2005, Ms Hacker had a telephone conversation with Mr David Purcell, another solicitor.  Mr Purcell told Ms Hacker that it would be necessary ‘to look at the way the notices were issued and you will have to go and look at the file at the Court as to how the documents were served’.  In the same week, Ms Hacker went to the Federal Court Registry in Queens Square and was given a pro forma notice of motion and affidavit.  Ms Hacker did nothing with those pro forma documents.

21                  On Monday, 19 September 2005, Ms Hacker spoke to Mr Peter Lander, a third solicitor.  Mr Lander arranged an appointment to see Ms Hacker on 21 September 2005.  On that day, Mr Lander and the Debtors conferred for approximately 45 minutes.  Mr Lander was given a number of documents, including affidavits by Mr Robert Warren of service of the Bankruptcy Notice.  Mr Lander says that, at that stage, he was unaware that there may have been an issue as to service of the Bankruptcy Notice.  He was not aware of the procedure to review the orders of a registrar pursuant to s 35A of the Federal Court Act, or the time limit for making any application in relation to a sequestration order.  He apparently made no immediate effort to find out.

22                  Following his meeting with the Debtors, Mr Lander wrote to the Trustee on 21 September 2005, indicating that he had received instructions from the Debtors.  The letter went on to say:

‘We are instructed by Mr Daday that he was unaware of the hearing of the application on 31 August 2005.

Ms Hacker has good reasons to explain her absence from Court on that day. 

Having regard to the real estate held by our clients and level of debt thereon they are clearly solvent.

Our clients have instructed us to prepare an application for annulment of the sequestration order and the same will be filed on their behalf within the next few days.’

No suggestion was made in the letter that Ms Hacker was unaware of the hearing on 31 August 2005.  Despite the fact that Mr Lander had affidavits of service of the Bankruptcy Notice, no assertion was made in the letter that the Bankruptcy Notice had not been served on either of the Debtors.

23                  On 21 September 2005, the Trustee wrote to the Debtors again, requesting information, including the submission of statements of affairs.  Shortly thereafter, an employee of the Trustee requested the Debtors to provide keys for apartments owned by the Debtors, which are used by them to generate income as serviced accommodation.  The Debtors declined to provide keys to the Trustee. 

24                  Mr Lander conferred with the Debtors on 22 September 2005 for approximately 45 minutes.  During that time, he had a telephone conversation with Mr JC Thompson of counsel.  He also had a conversation with Mr Graham Ward of the Trustee’s office in which Mr Lander said:

‘The primary debt of approximately $8,000 can be paid from the assets held by the bankrupts and all other creditors are either up to date or in an arrangement.’

            Mr Ward responded:

‘The position of all creditors needs to be taken into account in any annulment of the bankruptcy, as well as the costs of the bankrupt estate, including the costs of the Trustee.’

Mr Lander replied:

‘My clients dispute the appointment of the Trustee and an application will be forwarded to turn over the sequestration order.  My clients will also be disputing the fees of the Trustee.’

On 23 September 2005, the Trustee replied to Mr Lander’s letter of 21 September 2005, confirming his appointment as trustee and informing Mr Lander that the acts of bankruptcy relied upon occurred on 25 August 2004. 

25                  On 29 September 2005, Mr Lander conferred with the Debtors again, this time for approximately 50 minutes.  During the course of discussions on that occasion, it became apparent to Mr Lander, for the first time, that there was an issue as to service of the Bankruptcy Notice on the Debtors and as to service of the Petition on Mr Daday.

26                  Mr Lander wrote to the Trustee on 29 September 2005, informing him that he had received instructions to seek an order vacating the Sequestration Orders on the grounds that:

• Ms Hacker was not served with the Bankruptcy Notice on 4 August 2004;

·        Mr Daday was not served with the Petition on 5 August 2005.

No mention was made of failure to serve the Bankruptcy Notice on Mr Daday.

27                  The motion presently before the Court was filed on 30 September 2005.  After several directions hearings, it was fixed for hearing on 10 November 2005.  I directed the parties to adduce all of the evidence upon which they would rely on the question of service of the Bankruptcy Notice if an extension of time were granted.  The hearing was adjourned to enable further evidence to be filed concerning that question.  The evidence indicates that there are reasonably cogent reasons for concluding, on the balance of probabilities, that the Bankruptcy Notice was not served on either of the Debtors as alleged in the Petition. 

28                  Mr Warren swore two affidavits on 5 August 2004, in which he said that he served the Bankruptcy Notice on each of the Debtors on 4 August 2004 at 12.45 at the Narrabundah premises.  He said that at the time of service, he identified each of them by asking:

‘Are you Susie Hacker, the person referred to in this bankruptcy notice?

Are you Nandor Daday, the person referred to in this bankruptcy notice?’

In each of his affidavits he said:

‘The person then replied “Yes”’.

29                  Mr Warren had no basis for identifying either of the Debtors as the persons to whom he may have handed copies of the Bankruptcy Notice on 4 August 2004.  In an affidavit sworn in connection with this application, Mr Warren said that he had no current independent recollection of effecting service of the Bankruptcy Notice as referred to in the two affidavits of 5 August 2004.  He also said that he could not precisely recollect the people whom he served.  He said, however, that it is his usual procedure, when effecting service, to take some handwritten details of the service, most usually the time, place and words said or other relevant details and to prepare an affidavit using those details when he returns to his office.  He said that he had no reason to doubt that his affidavits of 5 August 2004 were prepared in the manner that he described.

30                  The Creditor tendered a document entitled ‘Commercial Agent Field Report’ completed by Mr Warren.  That document is a printed form in which various options have been completed, showing that a male and female were served on 4 August 2004 at 12.45 at the Narrabundah Premises.  The document also states that five other attempts to serve the Debtors had been made on 15, 19, 21, 25 and 27 July 2004 at various times of the day.  The document records that each of the persons to be served was to be asked ‘Are you [full name of defendant], the person referred to in this bankruptcy notice?’.

31                  I am satisfied that it is more likely than not that Mr Warren left copies of the Bankruptcy Notice with persons present at the Narrabundah Premises on 4 August 2004.  The question, however, is whether either of the Debtors was present at the Narrabundah Premises on that day. 

32                  Mr Daday gave evidence that he and Ms Hacker had resided in the Narrabundah Premises until a date prior to the end of 2003 and that the premises remained vacant until they were occupied by tenants under a residential tenancy agreement dated 30 April 2004.  The residential tenancy agreement is expressed to be between Mr Daday, as lessor, and Sue Baker, Chris Spouse and Caroline Pearce, as tenants.  The term of the tenancy was stated to be from 30 April 2004 to 30 October 2004.  Mr Daday said that the Narrabundah Premises were occupied by those tenants until after 1 October 2004, although he was unable to recall precisely when they were vacated by the tenants.   Mr Daday gave evidence that, while on occasion he may have stayed overnight at the Narrabundah Premises when travelling through Canberra, he did not reside there after 2003.  He denied that he was there on 4 August 2004. 

33                  Mr Daday sought to corroborate his denial by reference to a mobile telephone account showing that, at 7.21 am, 9.07 am, 12.42 pm and 5.18 pm on 4 August 2004, telephone calls were made to the same mobile telephone number.  Mr Daday said that the account was for his telephone and that the calls were made to Ms Hacker’s mobile telephone number.  If Mr Daday and Ms Hacker were both present at the Narrabundah Premises at 12.45 pm on 4 August 2004, it is unlikely that Mr Daday would have made a telephone call to Ms Hacker by mobile telephone at 12.42 pm.

34                  Mr Daday also gave evidence that he conducted a financial transaction at his bank in Sydney on 4 August 2004.  Mr Daday’s evidence was not particularly convincing.  He referred to a debit shown in a statement in respect of his bank account.  He asserted that the entry demonstrated that he made a personal withdrawal at his bank.  However, I would construe that statement as indicating a transfer, not necessarily a withdrawal.  There was nothing to indicate that the transaction was carried out in person.  I do not regard it as any corroboration of Mr Daday’s evidence that he was in Sydney on that day.

35                  Ms Hacker’s mother resides on a farm on the other side of Jindabyne from Narrabundah.  The distance between Narrabundah and Jindabyne is such that it would normally occupy more than 2 hours driving in a motor vehicle.  Ms Hacker gave evidence that she spent the whole of 4 August 2004 in or near Jindabyne.  Ms Hacker said that she visited a hairdresser in Jindabyne on the morning of 4 August 2004 and took her mother to see a medical practitioner in the afternoon of that day.  That evidence was corroborated by Ms Hacker’s mother, with whom Ms Hacker resided for several months from July to October 2004.  It was also corroborated by records of the medical practitioner, which suggest that he attended upon Ms Hacker and her mother in Jindabyne at 4.20 pm and 4.05 pm respectively, on the afternoon of 4 August 2004. 

36                  The Creditor contends that, even if the Bankruptcy Notice was not personally served on the Debtors, it was nevertheless validly served by the operation of the Bankruptcy Regulations 1966.  Regulation 16.01(1)(a) provides that, unless the contrary intention appears, where a document is required by the Bankruptcy Act to be given or sent to or served on a person, the document may be sent by mail or by a courier service to the person at his or her last known address.  Under Regulation 16.01(1)(c), a document may also be left, in an envelope or similar packaging marked with the person’s name, at the last known address of the person.  Regulation 16.01 applies to a bankruptcy notice (see Skalklas v T & S Recoveries Pty Ltd (2005) 213 ALR 311 at [29]-[31]). 

37                  The Creditor contends that Mr Warren should be regarded as providing a courier service and that, in the circumstances described, the Bankruptcy Notice was sent by courier to the last known address of the Debtors. The Creditor says that Mr Warren was retained to serve the Bankruptcy Notice.  He was given the copies of the Bankruptcy Notice and took them to the last address of the Debtors known to the Creditor.  The Narrabundah Premises is the address for service of notices which appeared on the Creditor’s strata roll kept pursuant to s 96 of the Strata Schemes Management Act 1996 (NSW) (‘the Strata Management Act’).  Section 118 of the Strata Management Act provides that a person who has an interest in a lot that gives the person a right to cast a vote at meetings of the owners’ corporation must notify the owners’ corporation in writing of that interest.  The notice must specify, inter alia, the person’s full name and an Australian address for service of notices.  Ms Hacker accepted that 5 Bareena Street, Narrabundah was the address for service notified to the Creditor for that purpose and that, notwithstanding that she later moved from that address, she failed to notify the Creditor of any change in her address before 4 August 2004.  The judgment debt in respect of which the Bankruptcy Notice was issued was for levies payable to the Creditor in respect of the Oxford Street Premises. The managing agent of the Creditor gave uncontested evidence that, as at 4 August 2004, the last address of the Debtors known to the Creditor was the Narrabundah Premises. 

38                  I am satisfied that, as at 4 August 2004, 5 Bareena Street, Narrabundah was the last address of the Debtors known to the Creditor.  I am satisfied that Mr Warren left the copies of the Bankruptcy Notice with persons apparently in occupation of the Narrabundah Premises.  Whether or not those persons incorrectly identified themselves, it is clear that the recipients of the documents were aware that they were intended for the Debtors. 

39                  A courier might be described as a carrier who travels from one place to another to provide a safe and urgent letter or parcel delivery service (see the Australian Legal Dictionary).  A courier might also be described as a running messenger, a messenger sent in haste or a special messenger (see the Shorter Oxford English Dictionary). A courier service is a private company which provides a letter or parcel delivery service, especially one which guarantees speed or safety (see the Macquarie Dictionary).  It would be surprising if Mr Warren regarded himself as a courier or as conducting a courier service.  I do not consider that the Bankruptcy Notice was sent to the Narrabundah Premises by a courier service.  It was not served in accordance with reg 16.01(a). 

40                  Neither of the Debtors gave evidence that he or she was unaware that a Bankruptcy Notice had been issued in respect of the judgment obtained against them by the Creditor in respect of outstanding levies in respect of the Oxford Street Premises. Neither of them gave evidence that that they were unaware of the delivery of the Bankruptcy Notice to the Narrabundah Premises. 

41                  It is not disputed that the Debtors were indebted to the Creditor in a sum in excess of $2,000 as at 31 August 2005.  However, since that time, the whole of the indebtedness of the Debtors to the Creditor has been satisfied.  Accordingly, the Creditor now accepts that, as at today, the Petition could not succeed, because the Debtors are not indebted to the Creditor. 

42                  The Debtors showed a complete disregard for the processes of the Bankruptcy Act and the Court.  They were aware of the Petition on 5 August 2005 and on that day were given copies of affidavits sworn by Mr Warren asserting that the Bankruptcy Notice had been served on each of them at the Narrabundah Premises on 4 August 2004.  Yet they did nothing about the Petition.  Even when informed by the Trustee of the sequestration orders, they made no effort to cooperate with the Trustee.  They waited weeks before making an application for review of the sequestration orders.  Even that application was lodged out of time, notwithstanding that Ms Hacker had been informed by the registry, prior to the making of the sequestration orders, that she must apply for any review within 21 days.

43                  The debt of the Debtors to the Creditor is a joint debt by reason of their joint ownership of the Oxford Street Premises.  It appears that judgment was obtained against them jointly and a single bankruptcy notice was issued to them jointly.  Each is named in the Petition.  No point has been taken as to the propriety of proceeding against the Debtors as joint debtors. 

44                  If the extension of time is refused, it is still open to the Debtors to apply for annulment of the bankruptcies on the grounds that the sequestration orders ought not to have been made.  In all of the circumstances, I am not persuaded that the Debtors should be granted an extension of time within which to seek review of the Registrar’s orders of 31 August 2005 sequestrating their respective estates.   

45                  The Trustee contended that, if the Court were of the view that the bankruptcies should come to an end, rather than extend time for an application for review of the sequestration orders, the appropriate course would be to annul the bankruptcies pursuant to s 153B of the Bankruptcy Act.  The Debtors also intimated to the Court that, if the Court declined to extend time for an application for review of the sequestration orders, the Court should annul the bankruptcies pursuant to s 153B. 

46                  Section 153B(1) of the Bankruptcy Act relevantly provides that, if the Court is satisfied that a sequestration order ought not to have been made, the Court may make an order annulling the bankruptcy.  The phrase ‘ought not to have been made’ is to be applied in the light of all the true facts as known at the time of the application for annulment, irrespective of the evidence that may have been before the Court that made the sequestration order.  Thus, even when a bankrupt stands by at the time of entry of default judgment and does nothing in respect of a bankruptcy notice or bankruptcy petition, if it is subsequently established, after the making of a sequestration order, that there was no act of bankruptcy, then it follows that the sequestration order ought not to have been made and s 153B would apply (see Re Raymond; Ex parte Raymond (1992) 36 FCR 424.

47                  Neither the Creditor nor the Trustee opposed the making of an order under s 153B, if the Court declined to make an order extending the time for applying for a review of the sequestration orders.   While there is evidence that there are other unsecured creditors of the Debtors whose debts remain unpaid, the Trustee considers that the assets of the Debtors are more than adequate to meet their debts.

48                  I have some reservations about making orders annulling the bankruptcies.  However, in the absence of opposition from the Trustee, I would be disposed to do so if satisfied that a sequestration order ought not to have been made in respect of the estates of the Debtors.

49                  I have said the evidence as to service of the Bankruptcy Notice is highly unsatisfactory from the point of view of Mr Warren and the Creditor.  I am not persuaded that the Bankruptcy Notice was served in accordance with Regulation 16.05(1).  Further, I consider that it is more likely than not that the Bankruptcy Notice was not served personally on either of the Debtors on 4 August 2004.  It follows, therefore, that there was no act of bankruptcy on the part of either of the Debtors.  Accordingly, the sequestration orders ought not to have been made and that therefore the bankruptcies should be annulled. 

50                  The creditor and the trustee ask for their costs of the application.  Ordinarily costs would follow the event.  However, there has been a substantial issue in the proceeding in respect of which the debtors were successful.  Certainly that issue was one that should have been raised a long time ago.

51                  I consider that the appropriate course is to order the debtors to pay the Trustee’s costs of the proceeding and to order the debtors to pay 75 per cent of the Creditor's costs of the proceeding.

Associate:

Dated:              2 February 2006