FEDERAL COURT OF AUSTRALIA
Aquamore Credit Equity Pty Ltd v Maroon [2023] FCA 1399
File numbers: NSD 23 of 2022
NSD 31 of 2022Judgment of: STEWART J Date of judgment: 13 November 2023 Catchwords: BANKRUPTCY AND INSOLVENCY – whether the requirements for a sequestration order have been established – the Court’s discretion not to make sequestration orders under s 52(1) of the Bankruptcy Act 1966 – whether solvency is established – whether the Court should go behind Supreme Court judgments to consider the claim that no debt is owed to the applicant – whether there is prejudice to the debtors Legislation: Bankruptcy Act 1966 (Cth), ss 41(1), 41(2), 41(3), 52(1), 52(2), 52(2)(a), 52(2)(b), 52(5), 58(1)(a)
Bankruptcy Regulations 2021 (Cth) r 4.01
Federal Court (Bankruptcy Rules) 2016 (Cth) r 4.04(1)(a)
Contracts Review Act 1980 (NSW)
Cases cited: Australian Securities and Investments Commission v Forge [2003] FCAFC 274; 133 FCR 487
Florgale Uniforms Pty Ltd v Orders [2004] VSC 65 ;11 VR 54
In the matter of Vitamin Co Pty Ltd [2019] VSC 540
Liang v LV Property Investments Pty Ltd [2015] FCA 1057
Ramsay Health Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132
Sandell v Porter [1966] HCA 28; 115 CLR 666
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 53 Date of last submissions: 13 October 2023 Date of hearing: 28 September 2023 Counsel for the Applicant in NSD23/2022 and NSD31/2022: B Koch Solicitor for the Applicant in NSD23/2022 and NSD31/2022: Independent Legal Counsel for the First Respondent in NSD23/2022: The First Respondent appeared in person. Counsel for the Second Respondent in NSD 23/2022: The Second Respondent appeared in person. Counsel for the Second Respondent in NSD31/2022: D C Eardley Solicitor for the Second Respondent in NSD31/2022: Moscardo Lawyers ORDERS
NSD 23 of 2022
BETWEEN: AQUAMORE CREDIT EQUITY PTY LTD ACN 609 876 940 AS TRUSTEE FOR THE SPRING PARK UNIT TRUST
Applicant
AND: CHRISTOPHER ARTHUR MAROON
First Respondent
ALLAN JOHN MAROON
Second Respondent
ORDER MADE BY:
STEWART J
DATE OF ORDER:
13 NOVEMBER 2023
THE COURT ORDERS THAT:
1.The estate of Christopher Arthur Maroon be sequestrated under the Bankruptcy Act 1966 (Cth).
2.The applicant creditor’s costs be paid from Christopher Arthur Maroon’s bankrupt estate in accordance with the Bankruptcy Act 1966 (Cth).
3.The estate of Allan John Maroon be sequestrated under the Bankruptcy Act 1966.
4.The applicant creditor’s costs be paid from Allan John Maroon’s bankrupt estate in accordance with the Bankruptcy Act 1966 (Cth).
5.The applicant provide a copy of these orders to the Official Receiver within two business days.
THE COURT NOTES THAT:
1.The date of commission of the act of bankruptcy by Christopher Arthur Maroon is 17 December 2021.
2.A consent to act as trustee…
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- Case
- [2023] FCA 1399
- Decision Date
CaseChat Overview and Summary
The primary legal issues addressed by the court involved whether the statutory requirements for a sequestration order were satisfied and whether the Maroons' insolvency was established. Additionally, the court had to decide if it should consider claims against the Juris parties, who were alleged to be negligent in their advice related to the facility agreements. The court also needed to assess whether there was prejudice to the debtors that would warrant exercising the discretion not to make sequestration orders.
The court found that all formal requirements for a sequestration order were met, including the statutory minimum debt amount, proper service of the bankruptcy notice, and timely compliance with the necessary procedures. The Maroons argued that the court should consider claims against the Juris parties, which they believed negated the debt owed to Aquamore. However, the court rejected this argument, stating that such claims did not affect the statutory requirements for a sequestration order. The court further noted that the discretion not to make sequestration orders could only be exercised if the Maroons could demonstrate solvency or if there was sufficient cause, neither of which was established in this case.
In conclusion, the court determined that the Maroons were insolvent and that there was no sufficient cause to exercise the discretion not to make sequestration orders. The court granted the sequestration orders against the Maroons' estates and directed that the applicant's costs be paid from Michael Maroon's bankrupt estate. The court also noted that the date of the act of bankruptcy was 17 December 2021 and that a consent to act as trustee had been filed.
Orders
Orders of the court
1. The estate of Michael John Maroon be sequestrated under the Bankruptcy Act 1966 (Cth).
2. The applicant creditor’s costs be paid from Michael John Maroon’s bankrupt estate in accordance with the Bankruptcy Act 1966 (Cth).
3. The applicant provide a copy of these orders to the Official Receiver within two business days.
THE COURT NOTES THAT:
1. The date of commission of the act of bankruptcy is 17 December 2021.
2. A consent to act as trustee signed by Sean Magnus Wengel has been filed under s 156A of the Bankruptcy Act 1966 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
The claim against the Juris parties is asserted by Michael and Nadia, and not by Christopher and Allan. It is that the Juris parties were negligent in failing to explain the facility agreements before they were signed, or in the advice they gave in that regard, or that they breached their retainer. That includes on the basis that the consent orders which resulted in the first judgment in the 2018 Supreme Court proceeding were agreed to by the Juris parties without the consent of Michael and Nadia. The requirements for a sequestration order There is no dispute that the various formal requirements that enliven the power to order the sequestration of the estates of Christopher, Allan and Michael have been met. In that regard:(1)The bankruptcy notice was obtained in respect of final judgments that taken together, in each case, amount to at least the statutory minimum of $5,000 (s 41(1));(2)The bankruptcy notice was in the form prescribed by the regulations (s 41(2));(3)When the bankruptcy notice was issued, a period of more than six years had not elapsed since each of the judgments (s 41(3));(4)The bankruptcy notice had attached to it copies of the two judgments (Bankruptcy Regulations 1996 (Cth), r 4.01);(5)The bankruptcy notice was served on each of the Maroons within six months of it being issued (Bankruptcy Regulations, r 4.02A);(6)The debtors committed an act of bankruptcy for the purposes of s 40 by failing to comply with the bankruptcy notice by 17 December 2021;(7)Each creditor’s petition was presented within six months of the date of the act of bankruptcy and relates to a debt exceeding $5,000 (s 44(1)(a) and (c));(8)Each petition is accompanied by an affidavit of search (Federal Court (Bankruptcy Rules) 2016 (Cth), r 4.04(1)(a));(9)Affidavits of final search and final debt fulfilling the requirements of r 4.06 of the Federal Court (Bankruptcy Rules) 2016 were tendered. The requirements of s 52(1) are accordingly established, and the Court can therefore exercise its power to make sequestration orders against each of Christopher, Allan and Michael. I gratefully adopt the summary of the applicable principles by Burley J in Toyota Finance Australia Ltd v Youssef Berro [2022] FCA 497:33 The petitioning creditor has a prima facie right to a sequestration order once proof of the matters required by s 52(1) has been satisfied: Cain v Whyte [1933] HCA 6; 48 CLR 639 at 646 and 648 (Rich J, Starke, Dixon, Evatt and McTiernan JJ agreeing); Rozenbes v Kronhill [1956] HCA 65; 95 CLR 407 at 414 (Dixon CJ, Webb and Fullagar JJ).34 Nevertheless, the Court retains a discretion to refuse such an order if the debtor is able to pay their debts (s 52(2)(a)) or for “other sufficient cause” (s 52(2)(b)). The onus is on the debtor, …, to establish either or both of the preconditions. The circumstances which may constitute “other sufficient cause” are variable, and it is inappropriate to catalogue or circumscribe them: Clyne v Deputy Commissioner of Taxation [1985] FCA 4; 5 FCR 1 at 5 (Fisher, Morling and Wilcox JJ); Liang v LV Property Investments Pty Ltd [2015] FCA 1057 at [52] (Beach J).35 The requirement that the creditor prove that the debt relied upon is still owing will ordinarily be easier to fulfil in respect of a judgment debt, the judgment being prima facie evidence of the debt: Wolff v Donovan [1991] FCA 222; 29 FCR 480 at 487 (Davies J).36 One relevant matter is that the Court has power to go “round the judgment”, to enquire into its subject matter, so as to satisfy itself that the creditor’s petition is founded on a “good debt”: Shaw v Yarranova Pty Ltd [2017] FCAFC 88; 252 FCR 267 at [16] (North, Perry and Charlesworth JJ). The scrutiny required by s 52, which includes consideration of “whether there is, in truth and reality, a debt owing to the petitioning creditor[,] serves to protect the interests of third parties, particularly other creditors of the debtor”: Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132 at [55] (Kiefel CJ, Keane and Nettle JJ).37 Even if “other sufficient cause” has been shown, that merely enlivens the court’s discretion to refuse to make a sequestration order. “The power in s 52(2) is permissive, not mandatory. Even if a debtor can bring himself or herself within s 52(2)(b), that does not entitle him or her to have a sequestration order refused”: Endresz v Australian Securities and Investments Commission (No 2) [2015] FCAFC 33; 228 FCR 334 at [37] (Edmonds, Gordon and Beach JJ); Russell v Polites Investments Pty Ltd [2012] FCA 11 at [24] (Flick J); Liang at [53] (Beach J). The grounds of opposition