FEDERAL COURT OF AUSTRALIA

Ramsay Health Care Australia Pty Limited, in the matter of Compton v Compton [2018] FCA 742

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to the applicant to personally serve on the respondent, being a person outside the jurisdiction, in Virginia, the United States of America, the following documents:

(a)    the creditor’s petition (“the petition”) filed by the applicant on 26 April 2018;

(b)    the affidavit of John Dennis Charles O’Grady sworn on 16 April 2018 verifying the petition as required by s 47 of the Bankruptcy Act 1966 (Cth) (“Act”);

(c)    the consent of Barry Taylor to act as trustee of the respondent debtor’s estate filed under s 156A of the Act; and

(d)    a copy of the Court’s orders made in relation to the interim application filed on 27 April 2018.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GLEESON J:

1    On 2 May 2018, I granted leave to the applicant (“Ramsay”) to personally serve documents on the respondent (“Mr Compton”) in Virginia, the United States of America, in connection with Ramsay’s continuing efforts to enforce a judgment obtained by it in the Supreme Court of New South Wales in March 2015, by proceedings under the Bankruptcy Act 1966 (Cth) (“Act”).

2    The relevant documents are:

(1)    a creditor’s petition filed by Ramsay on 26 April 2018;

(2)    an affidavit verifying the petition;

(3)    the consent of Barry Taylor to act as trustee of Mr Compton’s estate; and

(4)    a copy of the Court’s orders made in relation to an interim application filed on 27 April 2018.

3    These are my reasons for granting that leave.

Facts

Debt owing

4    The creditor’s petition states that Mr Compton owes Ramsay “the amount of at least $5,099,870.89 in respect of the judgment obtained by [Ramsay] in Supreme Court of New South Wales proceedings no. 2014/00164906”.

5    This amount is less than the judgment given in Ramsay’s favour in those proceedings on 6 March 2015, which was $9,810,312.22: Ramsay Health Care Australia Pty Ltd v Adrian Compton [2015] NSWSC 163. In her affidavit sworn 16 April 2018, Caitlin Murray, a partner of the law firm MinterEllison and solicitor for Ramsay, explained that Ramsay has accepted that there are amounts which it owed Compton Fellers Pty Ltd trading as Medichoice (in liquidation) which could be set off against the judgment debt, thereby reducing the debt owing to no less than $5,099,870.89.

History of proceeding

6    The background to the application is set out in Ms Murray’s affidavit.

7    The history is long and complex. The salient facts are:

(1)    on 5 June 2015, Ramsay filed an earlier creditor’s petition based on non-compliance with a bankruptcy notice requiring payment of the March 2015 judgment amount;

(2)    on 7 July 2015, Mr Compton filed a notice stating grounds of opposition to that creditor’s petition, including that the Court should exercise its discretion to go behind the Supreme Court judgment;

(3)    in November 2015, Flick J rejected the application to exercise the Court’s discretion to go behind the Supreme Court judgment: Ramsay Health Care Australia Pty Ltd v Compton [2015] FCA 1207;

(4)    on 17 August 2016, a Full Court allowed Mr Compton’s appeal from the decision in (3) above: Compton v Ramsay Health Care Australia Pty Ltd [2016] FCAFC 106;

(5)    on 26 August 2016, a differently constituted Full Court made orders having the effect that the earlier creditor’s petition was extended to 5 June 2017;

(6)    on 13 September 2016, McDougall J dismissed an application to set aside the March 2015 judgment but granted a temporary stay of the judgment: Compton v Ramsay Health Care Australia Pty Ltd [2016] NSWSC 1331;

(7)    on 4 May 2017, the High Court of Australia dismissed Ramsay’s appeal from the Full Court’s decision in (4) above: Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28;

(8)    on 10 May 2017, the earlier creditor’s petition was listed before Flick J for case management. His Honour rejected an adjournment application by Mr Compton. On 18 May 2017, Mr Compton’s then-lawyer informed Ms Murray that he had served on Mr Compton a notice of intention to cease to act;

(9)    on 19 May 2017, Ms Murray received a letter from Chris Perry of Pure Legal, indicating that Ms Perry had been contacted to act for Mr Compton’s wife, Amy Compton. After a directions hearing on 23 May 2017, on 26 May 2017 Ms Compton was appointed as Mr Compton’s litigation representative. Ms Compton then made an application for an adjournment of the creditor’s petition which was refused on 30 May 2017: Ramsay Health Care Australia Pty Ltd v Compton [2017] FCA 612;

(10)    on 31 May 2017, Ms Perry provided Ms Murray with an authority signed by Mr Compton pursuant to s 188 of the Act, along with a consent to act as controlling trustee signed by Paul Weston;

(11)    prior to the hearing on 1 June 2017, an application was made by Mr Weston for a stay of the earlier creditor’s petition proceeding on the basis of the s 188 authority. Flick J rejected that application on the basis that Mr Weston was unable to demonstrate that the s 188 authority was effective as Mr Compton had not complied with the requirement that, prior to the consent being given by Mr Weston, Mr Compton provide to Mr Weston a statement of affairs and a proposal for dealing with them under Part X of the Act;

(12)    following his Honour’s refusal of Mr Weston’s application for a stay, Ms Perry appeared on behalf of Ms Compton and sought a further adjournment, which was also refused. Ms Perry then withdrew Ms Compton’s consent to act as Mr Compton’s legal representative and withdrew from the Court;

(13)    argument on the earlier creditor’s petition was heard by Flick J on 1 June 2017, including as to the quantum of the amount owing to Ramsay;

(14)    on 1 June 2017, Mr Compton swore an affidavit in which he described himself as “temporarily residing” at an address in Altavista, USA, and stating facts concerning his residency;

(15)    on 2 June 2017, Flick J made an order that Mr Compton’s estate be sequestrated under the Act: Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2017] FCA 629;

(16)    on 9 June 2017, Ms Perry filed a notice of appearance on behalf of Mr Compton in the earlier creditor’s petition proceeding. She has not withdrawn that appearance;

(17)    on 15 June 2017, Flick J made an order for an expedited appeal from his 2 June 2017 decision. The orders included the following notation:

6.    The Court notes that the Respondent (Adrian John Compton), who is the Appellant in the 2017 Appeal Proceeding, does not raise in the 2017 Appeal Proceeding, any challenge or issue as to the following:

a.    the finding of the Court on 2 June 2017 that:

i.    the Appellant is insolvent;

ii.    having gone behind the judgment given by the Supreme Court on 6 March 2015, the Appellant is indebted to the Applicant, which is the First Respondent in the 2017 Appeal Proceeding (Ramsay Health Care Australia Pty Ltd), for a sum no less than $5,000,

    it being the Appellant’s position that:

iii.    the authority under section 188 of the Bankruptcy Act 1966 (Cth) was and is legally valid and effective as set out in the Notice of Appeal ground of appeal No 1, with the consequence that the Appellant has committed an act of bankruptcy pursuant to section 40(1)(i) of the Bankruptcy Act 1966 (Cth);

iv.    there was in place a statutory stay, pursuant to section 189AAA(1) of the Bankruptcy Act 1966 (Cth), of proceeding NSD 660/2015 and, as such, the matters set out in the Notice of Appeal ground of appeal No 3 existed and the controlling trustee, Mr Paul Gerard Weston, and the Appellant are not bound by any finding in the reasons for judgment delivered on 2 June 2017;

v.    the Creditors Petition of the Applicant, which is the First Respondent in the 2017 Appeal Proceeding (Ramsay Health Care Australia Pty Ltd) dated on or about 5 June 2015 lapsed at the end of 5 June 2017 and proceeding NSD 660/2015 is at an end; and

b.    the Appellant’s competence to conduct the 2017 Appeal Proceeding.

(18)    on 21 December 2017, the Full Court allowed the appeal from Flick J’s decision ([2017] FCA 629): Compton v Ramsay Health Care Australia Pty Ltd [2017] FCAFC 221. At [76] of the Full Court’s reasons for judgment, the parties were invited to make submissions as to the form of orders arising from the decision, including in relation to costs; and

(19)    following the parties’ provision of these submissions, on 19 February 2018, the Full Court made orders disposing of the appeal: Compton v Ramsay Health Care Australia Pty Ltd (No 2) [2018] FCAFC 21;

(20)    The orders included that:

1.    Pursuant to s 188(6) of the Bankruptcy Act 1966 (Cth), the second respondent (Mr Weston) became the controlling trustee of the property of the appellant (Mr Compton) by about 5.00 pm on 1 June 2017 (Australian Eastern Standard Time).

…

5.    Pursuant to ss 30(1) and 33(1)(c) of the Bankruptcy Act and s 23 of the Federal Court of Australia Act 1976 (Cth), the time be extended nunc pro tunc for doing any act or thing under Pt X of the Bankruptcy Act, the Bankruptcy Regulations 1996 (Cth) or the Insolvency Practice Rules (Bankruptcy) 2016 (Cth) in relation to the authority signed at 9.15 pm on 31 May 2017 in Altavista, Virginia, United States of America, by Mr Compton under s 188(1) of the Bankruptcy Act naming and authorising Mr Weston to call a meeting of Mr Compton’s creditors and to take control of Mr Compton’s property, which Mr Weston consented to in writing on 1 June 2017 (Australian Eastern Standard Time), as if that authority had become effective on the seventh day after the date of this order.

8    There is evidence that, on about 22 March 2018, Paul Weston issued a controlling trustee’s report pursuant to s 189A of the Act; and that, by that report, Mr Weston called a meeting of Mr Compton’s creditors in pursuance of an authority signed by Mr Compton under s 188. The report states that Mr Compton’s current residential address is an address in Altavista, Virginia, United States of America. The report also records statements by Mr Compton that he is currently in the USA with his family to care for his ill father-in-law and to seek medical treatment for his own illness, and that it is his intention to return to Australia in the near future.

9    On 9 April 2018, I made the following orders in Federal Court proceeding no. NSD 660 of 2015:

1.    Pursuant to s 30(1) of the Bankruptcy Act 1966 (Cth) (“Act”), the Court declares nunc pro tunc that the authority signed by the first respondent and consented to in writing by the second respondent on 1 June 2017 is and was effective for the purposes of s 189AD of the Act on and from 26 February 2018.

2.    Pursuant to s 30(1) of the Act, the meeting of the creditors of the first respondent called for 9 April 2018 is a meeting validly convened under Part X of the Act.

10    There is also evidence that, on 9 April 2018, Mr Weston convened the s 188 meeting. The following resolutions were put to creditors and were not carried:

(1)    that Mr Compton execute a personal insolvency agreement;

(2)    that control of Mr Compton’s assets ends; and

(3)    that Mr Compton file a debtor’s petition.

11    The available evidence is that the meeting was concluded with no special resolution having been passed.

12    On 26 April 2018, Ramsay filed a creditor’s petition dated 16 April 2018 with the Court, by which Ramsay will apply for a sequestration order against Mr Compton under s 43 of the Act.

Act of bankruptcy

13    The act of bankruptcy specified in the creditor’s petition is that a meeting of Mr Compton’s creditors was called pursuant to an authority signed by him under s 188 of the Act.

14    The facts stated in the creditor’s petition, including as to the debt owed by Mr Compton to Mr Ramsay, are verified by an affidavit of John O’Grady, Ramsay’s company secretary, sworn 16 April 2018.

Attempts to arrange service

15    Ms Murray has asked Mr Compton’s solicitor in the first creditor petition proceeding, Ms Perry, whether she had instructions to accept service of documents on behalf of Mr Compton. Ms Perry does not have those instructions and has indicated that she would not bring documents sent to her to Mr Compton’s attention.

Proposed mode of service

16    Ramsay proposed to serve the documents personally. An affidavit of Thomas Coulter sworn 24 April 2018, an attorney practising in Virginia, provides evidence that personal service is a valid method of service as prescribed by the Code of Virginia. Particularly, Mr Coulter identifies VA Code Ann § 8.01-296 (2008) as allowing, relevantly, personal service of documents in any “civil proceeding in any court process, for which no particular mode of service is prescribed”.

Legal framework

17    Section 309(2) of the Act provides:

Where a notice or other document is required by this Act to be served on or given to a person, the Court may, in a particular case, order that it be given or served in a manner specified by the Court, whether or not any other manner of giving or serving the notice or other document is prescribed.

18    Exercise of the power conferred by s 309(2) is not conditioned upon a debtor’s presence in Australia: Battenberg v Restrom [2006] FCAFC 20; (2006) 149 FCR 128 at [18] and [19]. In Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256, Gibbs J ordered service of a creditor’s petition on a debtor in Portugal. In Deputy Commissioner of Taxation v Cranswick [2010] FCA 891; (2010) 117 ALD 95, McKerracher J made an order for substituted service of a creditor’s petition on a debtor outside the jurisdiction.

19    In Re Trimbole; Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 586 at 587, Sheppard J did not doubt the Court’s jurisdiction to give leave for overseas service of a creditor’s petition (although he was concerned about the proper form of orders for the service of a petition upon the debtor who was an inmate of a prison in Ireland).

20    In Re Mendonca at 261, Gibbs J stated:

[O]nce the Court sees that a petition is presented in circumstances which bring the case within s 43(1), but the debtor has absconded from Australia, the Court will normally order service on the debtor out of the jurisdiction.

21    In Cranswick at [7], McKerracher J stated that, before granting leave to serve a creditor’s petition outside the jurisdiction, the Court is required to reach a provisional or tentative conclusion on the material before it that the petitioning creditor has an arguable case.

22    Section 43(1) of the Act provides:

(1)    Subject to this Act, where:

(a)    a debtor has committed an act of bankruptcy; and

(b)    at the time when the act of bankruptcy was committed, the debtor:

(i)    was personally present or ordinarily resident in Australia;

(ii)    had a dwelling-house or place of business in Australia;

(iii)    was carrying on business in Australia, either personally or by means of an agent or manager; or

(iv)    was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;

the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.

23    Section 44(1) provides that a creditor’s petition shall not be presented against a debtor unless certain specified matters are satisfied.

Consideration

24    There was evidence that permitted me to reach the following provisional conclusions:

(1)    Mr Compton owes Ramsay the amount of at least $5,099,870.89 in respect of the judgment obtained by Ramsay in the Supreme Court proceeding;

(2)    the act of bankruptcy specified in the creditor’s petition was committed on 22 March 2018;

(3)    at the time when the act of bankruptcy was committed, Mr Compton was ordinarily resident in Australia;

(4)    the presentation of the creditor’s petition was not precluded by s 44(1); and

(5)    Mr Compton was presently residing at an address in Altavista, Virginia, USA.

25    The leave sought is apparently necessary for Ramsay to pursue the relief it seeks under the Act. Ramsay is entitled to pursue that relief. Mr Compton has invoked the Act himself by executing an authority under s 188 of the Act. There is no reason to think that leave should not be granted. The proposed mode of service is consistent with the laws of Virginia where Mr Compton is currently located. In those circumstances, I was satisfied that I should grant the leave sought.

Associate:

Dated:    23 May 2018