American Express Australia Limited v Kerr
[2008] FMCA 916
•24 June 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| AMERICAN EXPRESS AUSTRALIA LIMITED v KERR | [2008] FMCA 916 |
| BANKRUPTCY – Bankruptcy petition – adjourned to allow debtor to investigate and properly present her evidence and to set aside judgment debt. |
| Bankruptcy Act 1966 (Cth), s.52(2)(b) |
| Adamopoulos v Olympic Airways SA & Anor (1990) 95 ALR 525 |
| Applicant: | AMERICAN EXPRESS AUSTRALIA LIMITED (ACN 108 952 058) |
| Respondent: | JOYE MAREE KERR |
| File Number: | SYG 642 of 2008 |
| Judgment of: | Smith FM |
| Hearing date: | 24 June 2008 |
| Delivered at: | Sydney |
| Delivered on: | 24 June 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms J Foley |
| Solicitors for the Applicant: | Kemp Strang |
| Representing the Respondent: | Mr I Kerr (with leave of the Court) |
ORDERS
The petition is adjourned for hearing on 21 August 2008 at 10.15 am.
The respondent debtor must file and serve all additional affidavits relied upon, and an outline of her submissions no later than 11 August 2008.
The applicant creditor must file and serve any additional affidavits relied upon and an outline of its submissions no later than 4 pm on 19 August 2008.
The respondent’s notice to produce dated 6 June 2008 is stood over to the Registrar’s list on 16 July 2008 at 9.30 am. Any additional subpoenas may be made returnable at that time.
Costs reserved.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 642 of 2008
| AMERICAN EXPRESS AUSTRALIA LIMITED (ACN 108 952 058) |
Applicant
And
| JOYE MAREE KERR |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This creditor’s petition was filed on 17 March 2008, and relies on a judgment debt in the District Court entered on 11 October 2007 in the sum of $116,699.33. Non‑compliance with a bankruptcy notice based on that judgment occurred on 28 November 2007.
The petition has been adjourned three times. The first adjournment was to gain orders for substituted service. The further adjournments occurred by consent, because both parties wished to file evidence and obtain documents relating to grounds of objection raised by the respondent debtor, Mrs Kerr. The outstanding processes include service by Mrs Kerr on the applicant creditor, ‘AMEX’, of a notice to produce to which I shall refer below.
Mrs Kerr has been represented by her husband, who has prepared her notice of opposition. This and numerous affidavits and written outlines of submission are confusingly and repetitiously presented. They raise a whole variety of grounds for opposing the petition, including reference to Mrs Kerr’s ability to pay the debt from equity in their home, the prospect of obtaining further assets through pending litigation in Queensland, some of which are said to have a further listing in July, and other grounds based on the conduct of AMEX in relation to the debt.
The judgment debt appears to have been entered by default, pursuant to leave given at the time that a settlement was noted by the District Court. This provided for a schedule of payments pursuant to a deed of settlement. It appears that there was default under the schedule of payments, and that this has given rise to the default judgment.
Prima facie the deed of settlement finalised all outstanding issues in relation to the liability of Mrs Kerr to AMEX under a credit facility given to her. However, Mr Kerr puts forward a claim that the settlement was entered into by his wife in ignorance as to the entitlement of AMEX to debit her account with a significant amount, exceeding the current debt. It seems that her AMEX account was being used as a business account, which a supplier of pharmaceuticals had authority to debit in the course of trade. Mrs Kerr wishes to present arguments that this authority was improperly exercised.
Whether Mrs Kerr has evidence that AMEX was a party to, or had knowledge of, an improper debit is obscure on the material currently before me. However, Mrs Kerr has attempted to clarify AMEX’s knowledge of the matter by way of a notice to produce, but this failed due to AMEX’s claim that the notice went to an irrelevant issue. I do not think it was irrelevant. I think that it was clearly relevant to the contentions raised in opposition to the petition, and that Mrs Kerr should have an opportunity to have the notice properly answered. I shall make orders allowing this to occur before a Registrar.
Mrs Kerr has also filed a notice of motion in the District Court to set aside the default judgment, and this is returnable in the District Court on 1 August 2008. The affidavit in support makes some factual assertions in support of a challenge to AMEX’s debt, but does not attach a properly formulated defence, and does not address how Mrs Kerr proposes to meet reliance by AMEX upon her releases in the deed of settlement.
The petition was referred to me today by the Registrar, on the basis that both parties sought a further adjournment of the petition but could not agree upon its duration. AMEX seeks a short adjournment to allow its legal representatives to take further instructions, and to conduct further investigations into the financial affairs of Mrs Kerr. It opposed any longer adjournment, on the ground that interest was accruing both on its debt, and on other debts owed by Mr and Mrs Kerr to a secured creditor, and that this would eat into the equity in their home which would be available to unsecured creditors.
At present, Mrs Kerr claims that there is a surplus of some $455,309.68 available to unsecured creditors, and that this would meet all her current liabilities. The evidence about this is obscure at present, since although the property has been placed on the market by a mortgagee in possession, it has not yet secured a purchaser, and the evidence before me is unclear as to when that might happen. However, there does appear to be a prospect that money might become available sufficient to answer the present unsecured creditors’ debts and any interest on them which would accrue in the next two months. At least, I am not persuaded to the contrary.
An established principle of bankruptcy law is that a petition is normally adjourned where an appeal is pending against the judgment relied upon as the foundation for the bankruptcy proceedings, if the appeal is based on genuine and arguable grounds. This principle has also been applied in relation to pending applications to set aside default judgments. The general principle is referred to in many judgments, including Adamopoulos v Olympic Airways SA & Anor (1990) 95 ALR 525 at 531‑532.
In the present case the evidence on whether Mrs Kerr has genuine and arguable grounds for setting aside the judgment debt is somewhat obscure. I am satisfied that there is a genuine belief on the part of Mr and Mrs Kerr that she has arguable grounds, however, those grounds have been inadequately formulated. At this stage, the documents filed in the District Court which are before me do not reveal a good prospect of success in setting aside the default judgment. However, Mrs Kerr wishes to get legal assistance to properly formulate her case, and it remains, in my view, possible that the District Court might be persuaded to allow her contentions that there was unconscionability affecting her entry into the terms of settlement, sufficient to cause the District Court to set aside the default judgment and, if necessary, the terms of settlement. I have arrived at no conclusions as to this.
Since neither party is asking me to arrive at conclusions on these matters today, and both want an adjournment of the petition, I do not propose to discuss Mrs Kerr’s grounds for opposing the petition and setting aside the AMEX judgment any further.
In all the circumstances, I have concluded that it is appropriate to grant a longer period of adjournment than is acceptable to AMEX, so as to allow Mr and Mrs Kerr to obtain considered legal advice, and to properly formulate her claims which would challenge or offset the AMEX debt. It is possible that such advice may, if not procuring the setting aside of the default judgment, assist to present their evidence relevant to issues arising under s.52(2)(b) of the Bankruptcy Act 1966 (Cth), at least so as to resist the making of a sequestration order until Mr and Mrs Kerr’s claims in relation to their trading accounts have been litigated in other Courts.
Taking into account all that has been put to me today on behalf of AMEX, I therefore propose to adjourn the petition until a date available to the Court in the second half of August.
Mrs Kerr should not anticipate that further adjournments will be granted at that time, unless the grounds for those adjournments are better formulated and supported than they are in Mr Kerr’s currently confusing evidence and submissions.
I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Lilian Khaw
Date: 4 July 2008
0