FEDERAL CIRCUIT COURT OF AUSTRALIA
All Options Pty Ltd v Mathews (No 2) [2021] FCCA 1639
File number(s): MLG 4442 of 2019 Judgment of: JUDGE A. KELLY Date of judgment: 20 July 2021 Catchwords: BANKRUPTCY – application for review of exercise of power by a registrar – decision by registrar to make sequestration order – ground of opposition to petition that respondent not indebted to petitioner – judgment at trial affirmed on appeal – whether in truth and reality a debt owed – de novo hearing of petition – proof of matters required of petitioner established – no evidence of solvency – onus on debtor to persuade court that for other sufficient reason petition ought be dismissed – sequestration order affirmed. Legislation: Bankruptcy Act 1966 (Cth) ss 35A, 40, 52, 109
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) r 7.05
Federal Circuit Court of Australia Act 1999 (Cth) s 104Federal Circuit Court Rules 2001 (Cth) rr 20.03, 21.02
Cases cited: All Options Pty Ltd v Flightdeck Geelong Pty Ltd & Anor [2019] FCA 588
All Options Pty Ltd v Flightdeck Geelong Pty Ltd (No 2) [2019] FCA 1344
All Options Pty Ltd v Mathews [2021] FCCA 236
Bechara v Bates [2021] FCAFC 34
Cain v Whyte (1932) 48 CLR 639
Compton v Ramsay Health Care Australia Pty Ltd [2016] FCAFC 106
Flightdeck Geelong Pty Ltd & Anor v All Options Pty Ltd [2020] FCAFC 138
Petrie v Redmond [1943] St R Qld 71
Pineview Property Holdings Pty Ltd v Dimitriou (No 2) [2019] FCA 1416
Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132
Sayer-Jones v Juju Bean Investments Pty Ltd [2020] FCA 117
Stratton v Bowles (No 2) [2015] FCA 43
Wren v Mahony (1972) 126 CLR 212Number of paragraphs: 48 Date of hearing: 26 April 2021 Place: Melbourne Counsel for the Applicant: Mr S. Freire Solicitor for the Applicant: HWL Ebsworth Lawyers The Respondent In person ORDERS
MLG 4442 of 2019 BETWEEN: ALL OPTIONS PTY LTD (ACN 123 320 169)
Applicant
AND: DARREN MATHEWS
Respondent
ORDER MADE BY:
JUDGE A. KELLY
DATE OF ORDER:
20 JULY 2021
THE COURT ORDERS THAT:
1.Pursuant to ss 67-68 of the Federal Circuit Court of Australia Act 1999 (Cth), direct that the parties be allowed to appear and to make submissions before the Court by audio and video link.
2.The Order made on 15 October 2020 for the sequestration of the estate of Darren Mathews under the Bankruptcy Act 1966 (Cth) be affirmed.
3.The application for review filed on 10 November 2020 be dismissed.
4.The respondent pay the applicant’s taxed costs of the application for review, including reserved costs, such costs to be paid in the priority accorded by s 109(1)(a) of the Bankruptcy Act 1966 (Cth).
5.Pursuant to r 21.02(2)(a)-(b) of the Federal Circuit Court Rules 2001 (Cth), the method by which the costs payable pursuant to paragraph (4) of this Order are to be calculated be as follows:
(a)within 7 days, the petitioning creditor file…
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- Case
- [2021] FCCA 1639
- Decision Date
CaseChat Overview and Summary
The primary legal issue before the court was whether Mr Mathews had discharged the onus of proving that the debt relied upon by All Options was not still owing, thereby preventing the making of a sequestration order. This required the court to determine if the registrar's decision, which had been sought to be reviewed under s 104(2) of the *Federal Circuit Court of Australia Act 1999* (Cth), should be set aside. The review was to proceed as a hearing *de novo*, meaning the court would consider the creditor's petition afresh.
Justice Kelly reasoned that the review of a registrar's exercise of power under s 104(2) of the *Federal Circuit Court of Australia Act 1999* (Cth) necessitates a hearing *de novo* pursuant to r 20.03 of the *Federal Circuit Court Rules 2001* (Cth). In such a hearing, the onus rests on the petitioning creditor to prove the matters required by s 52(1) of the *Bankruptcy Act 1966* (Cth), namely the debt, service of the petition, and that the debt remains owing. The court found that All Options had obtained a final judgment against Mr Mathews, which had not been stayed, and that Mr Mathews had committed an act of bankruptcy by failing to comply with a bankruptcy notice. His Honour accepted the verifying affidavit as sufficient proof of the matters stated in the petition, including proof of service and that the debt was still owing.
Consequently, All Options Pty Ltd had established a *prima facie* entitlement to the making of a sequestration order against the estate of Mr Mathews.
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Background to the litigation
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Evidence Before The Court
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Decision
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Ratio Decidendi
Legal Principle Established
In the event, on 26 March 2021 (rather than by 9 March 2021), Mr Mathews filed an affidavit that he had sworn on 12 March 2021, deposing to the matters on which he relied in support of his contention that “the court should look behind the judgement under s 52(1)(c) of the Bankruptcy Act (“the Act”) and find that there is no judgment [sic] owing to the Applicant upon which [the] sequestration order could have been made.” Mr Mathews’ affidavit was arranged in essentially four parts by which he addressed the following topics: (1) self-representation at trial; (2) sales figures; (3) valuation evidence of the business and assets; (4) conclusion. I have examined that affidavit and the documents exhibited to it.Consideration Each of the parties made written and oral submissions which I have considered. While Mr Mathews’ application sought the review of the registrar’s decision “per subsection 35A(5) of the Act and Rule 7.05 of the Rules”, seemingly with reference to the applicable provisions of the Federal Court of Australia Act 1976 (Cth) and Federal Court (Bankruptcy) Rules 2016, the application was clearly intended to engage the entitlement conferred by s 104(2) of the Federal Circuit Court of Australia Act 1999 (Cth) to apply to this court for a review of the exercise of power by a registrar of this court. On such an application, this court may make any order or orders it thinks fit in relation to the matter in respect of which power had been exercised by a registrar: s 104(3). The review of an exercise a power by a registrar must proceed by way of a hearing de novo: Federal Circuit Court Rules 2001 (Cth), r 20.03; Bechara v Bates [2021] FCAFC 34. The court hears the creditor’s petition afresh and for that reason it is the creditor who bears the onus of proving the matters of which the court is to require proof engaging the discretionary power to make a sequestration order. Those matters are provided by s 52(1) of the Act which provides that at the hearing of a creditor’s petition the court shall require proof of the matters stated in the petition, service of the petition and the fact that the debt or debts on which the petitioning creditor relies is or are still owing. The petitioner’s verifying affidavit may be accepted as sufficient proof of those matters. On 23 August 2019, All Options obtained a final judgment, the execution of which has not been stayed. Subject to the matters which follow, I am further satisfied that Mr Mathews committed an act of bankruptcy constituted by his failure, before 12 December 2019, to comply with the bankruptcy notice that had been served upon him: Act, par 40(1)(g). Subject to the question of debt, I accept the affidavit verifying the petition as being sufficient proof of the matters stated in the petition: Act, par 52(1)(a). I was satisfied of proof of service of the petition and that the debt[s] relied upon are still owing: Act, pars 52(1)(b)-(c). All Options thus established a prima facie entitlement to the making of a sequestration order against the estate of Mr Mathews: Cain v Whyte (1932) 48 CLR 639, 646.