Baker v Remta

Case [2022] FedCFamC2G 1028

Federal Circuit and Family Court of Australia

(DIVISION 2)

Baker v Remta [2022] FedCFamC2G 1028

File number(s): PEG 169 of 2021
Judgment of: JUDGE STREET
Date of judgment: 22 November 2022
Catchwords: BANKRUPTCY – application in a proceeding for review of a Registrar-made sequestration order – oral application for an adjournment dismissed –de novo hearing – whether the respondent has established solvency – whether the respondent has established other sufficient cause –Registrar-made sequestration order confirmed  
Legislation:

Bankruptcy Act1966 (Cth) ss 5(2), 27, 43, 52

Corporations Act 2001 (Cth) s 206B

Cases cited:

Bechara v Bates [2021] FCAFC 34

Liang v LV Property Investments Pty Ltd [2015] FCA 1057

Zdrilic v Hickie [2016] FCAFC 101

Division: Division 2 General Federal Law
Number of paragraphs: 25
Date of hearing: 22 November 2022
Place: Perth
Solicitor for the Applicant: Mr Barrett, Lavan
Solicitor for the Respondent: Ms Gates, Taylor Smart Lawyers & Notaries

ORDERS

PEG 169 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

TRACEY BAKER AS EXECUTRIX OF THE WILL OF GLENN WILLIAM BAKER

Applicant
AND:

PETER JOHN AUGUSTIN REMTA

Respondent

order made by:

JUDGE STREET

DATE OF ORDER:

22 NOVEMBER 2022

THE COURT ORDERS THAT:

1.The Court confirms the sequestration order number two made on 31 October 2022 by Registrar Benter against the estate of Peter John Augustin Remta under the Bankruptcy Act 1966 (Cth).

2.The petitioning creditor’s further costs in the sum of $550.00 be paid out of the bankrupt estate with the priority to which it is entitled.

3.The Principal Registrar of this Court is to send a copy of the reasons for judgment of this Court to the Executive Director of the Office of Markets Enforcement of the Australian Securities and Investment Commission.

4.The application filed on 17 November 2022 seeking a stay of the proceedings under the sequestration order is dismissed.

THE COURT NOTES THAT:

A.The act of bankruptcy occurred on 10 June 2021.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

EX TEMPORE REASONS FOR JUDGMENT

JUDGE STREET:

introduction

  1. On 31 October 2022, a Registrar of the Court make a sequestration order against the estate of the respondent. The Registrar also made a stay of proceedings under those orders for a period of 21 days. On 17 November 2022, the respondent filed two applications in a proceeding, the first one seeking an extension of the Registrar’s stay of proceedings under the sequestration order and a second seeking a review of the sequestration order.

  2. The matter is within the Court’s jurisdiction under s 27 of the Bankruptcy Act1966 (Cth) (“the Act

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AGLC
Baker v Remta [2022] FedCFamC2G 1028
Case
[2022] FedCFamC2G 1028
Decision Date

CaseChat Overview and Summary

In the case of Baker v Remta, the primary dispute involves the petitioning creditor, Baker, seeking a sequestration order against the respondent, Remta, following an act of bankruptcy. The matter was heard in the Federal Circuit and Family Court of Australia, where the court was required to determine whether there were sufficient grounds to issue a sequestration order against Remta. The central legal issues before the court were whether the respondent was solvent, and if there were any other sufficient causes that would prevent the issuance of a sequestration order. The court examined the affidavits, expert reports, and statutory declarations submitted by both parties to assess these issues.

The court found that the evidence presented by the petitioning creditor satisfied the requirements under sections 43 and 52 of the relevant Act, establishing an act of bankruptcy. Despite the respondent's arguments and expert reports suggesting solvency, the court determined that these did not sufficiently establish that the respondent could pay his debts as they fell due. The court also noted that the respondent's assertion of solvency was not supported by proper evidence, and that his conduct as a disqualified director was concerning. The court further found that the appeal, if genuine, did not have arguable grounds, and thus did not warrant dismissal or adjournment of the petition.

Based on these findings, the court concluded that the petitioning creditor was entitled to a sequestration order. The court confirmed the earlier sequestration order made by the Registrar and further directed that a copy of the reasons for the decision be sent to the appropriate regulatory authority regarding the respondent's conduct as a disqualified director. This decision highlights the importance of providing adequate evidence in support of solvency claims and the consequences of acting as a disqualified director.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The nature of the hearing, as a matter of constitutional necessity, is one of a hearing de novo for reasons identified by the Full Court in Zdrilic v Hickie [2016] FCAFC 101 and, more recently, in Bechara v Bates [2021] FCAFC 34.evidence AND REASONING The petitioning creditor has read affidavit evidence, establishing verification of the petition, service of the bankruptcy notice, service of the creditor’s petition and also, prior to the making of the sequestration order, an affidavit of search, and an affidavit of debt as before the Registrar. As indicated, there is no requirement for such a fresh round of affidavits in circumstances where the sequestration order was made by the Registrar. That is not because it is not a hearing de novo, but simply because there is no utility in a search and/or an affidavit of debt at a point of time when there is already in place a sequestration order and no suggestion was advanced of post Registrar sequestration order payment. The petitioning creditor’s evidence establishes an act of bankruptcy within the jurisdiction and satisfies the requirements of ss 43 and 52 of the Act, enlivening the Court’s powers to make a sequestration order. The Court heard submissions from Ms Gates as to why there was other sufficient cause by reason of which a sequestration order ought not to be made. The first argument advanced was that, based on the expert’s report, it supported the conclusion that the respondent was solvent. The expert report supported no such conclusion; it was a conditional statement in respect of solvency. It was also one in respect of which the report applied the wrong statutory provisions, as it addressed the Corporations Act 2001 (Cth) (“the Corporations Act”). It is also apparent that that report treated the assets of the company as if they were in some way assets available for use by the respondent. There is no supporting evidence in respect of the alleged receivables, albeit there was reference to alleged loans that the company owed the respondent. The evidence falls well short of establishing, under s 5(2) of the Act, that the respondent is able to pay his debts as they fall due. The respondent also made an assertion of fact that he was solvent, but provided no proper evidence in support of his existing assets and liabilities. There was a statutory declaration next to the expert’s report in which the respondent identified having no substantial assets. The act of bankruptcy is, of itself, some evidence in support of the fact of a person being unable to pay their debts. The expert report in this case falls well short of establishing solvency in respect of the respondent, and the respondent’s own evidence does not establish that he is able to pay his debts as they fall due. Indeed, the respondent’s evidence identifies that he is treating with other creditors and seeking to make arrangements again related to the corporate entity in order to try and advance his own personal liabilities. The affidavit filed by the respondent, dated 17 November 2022, asserted on oath that he is a director of the company. The respondent became immediately disqualified by way of automatic disqualification under s 206B of the Corporations Act on the making of the sequestration order by the Registrar. The Court infers from the affidavit of the respondent dated 17 November 2022 that he has continued to assert and utilise the office of director of the company, a matter which is of considerable concern given the automatic disqualification under s 206B of the Corporations Act.

Decision

Reasons for decision

Given the admission made by the respondent as to the existence of the loan in his own affidavit under oath, taken together with the written loan agreement annexed to the expert’s report, the Court can identify no basis upon which it could be said that there is a real chance of success on appeal. The Court does understand that, ordinarily, the Court should not proceed to make a sequestration order where there is an appeal on foot which is genuine and has arguable grounds. The Court is not satisfied that the appeal on foot is genuine and has arguable grounds. The Court finds that the appeal has no real chance of success in light of the existence of the admission under oath by the respondent of the loan and the existence of the loan agreement in writing attached to the expert’s report.CONCLUSIONS For the reasons already given, the Court is not satisfied that the respondent is solvent. In these circumstances, the Court is not satisfied that there is other sufficient cause why a sequestration order ought not to be made. The Court can see no reason in the present case why it would go behind the judgment. The loan agreement and the admission by the respondent identify not proper basis to do so. The Court has also taken into account the evidence that refers to a cross-claim against the petitioning creditor. The cross-claim is not the subject of any evidence to support the same, and the Court is not satisfied that it is bona fide and discloses a reasonably arguable claim. Further as a matter of discretion the appeal on foot in this case does not warrant an adjournment or dismissal of the petition. Accordingly, the Court is not satisfied that there is other sufficient cause why a sequestration order ought not to be made. The Court finds that the petitioning creditor is entitled to a sequestration order. On the hearing de novo, the Court would make a sequestration order against the estate of Peter John Augustin Remta. Given that there is already a sequestration order that has been made by the Registrar, the Court makes an order confirming the earlier sequestration order. Aftr publishing these oral reasons the Court asked Ms Gates why an order should not be made referring the continued director steps to raise and utilise company funds after being automatically disqualified. The affidavit makes clear the continued assertion of being a director. It was not suggested that the respondent had not continued to conduct himself as if a director whilst in fact disqualified. The Court is satisfied that it is appropriate in this matter to make an order for the Registrar to send a copy of these reasons to the appropriate regulatory authority in respect of that conduct.

Ratio Decidendi

Legal Principle Established

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