Black v Mills (No.4)
[2019] FCCA 129
•28 February 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BLACK v MILLS (No.4) | [2019] FCCA 129 |
| Catchwords: BANKRUPTCY – Creditor’s petition – opposed on the basis of solvency and because the debt disputed – evidence of solvency – small debt – payment of part of the debt which was indisputable – petition dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), s.52 |
| Cases cited: Black v Mills (No.2) [2015] FCCA 1973 Black v Mills (No.3) [2017] FCCA 380 |
| Applicant: | RICHARD BLACK |
| Respondent: | BERNADETTE MILLS |
| File Number: | SYG 556 of 2018 |
| Judgment of: | Judge Driver |
| Hearing date: | 23 November 2018 |
| Date of Last Submission: | 11 January 2019 |
| Delivered at: | Sydney |
| Delivered on: | 28 February 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr C K Stewart |
| The Respondent appeared by videolink from Perth |
ORDERS
The petition presented on 2 March 2018 as amended on 27 April 2018 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 556 of 2018
| RICHARD BLACK |
Applicant
And
| BERNADETTE MILLS |
Respondent
REASONS FOR JUDGMENT
Introduction and background
By a creditor’s petition presented on 2 March 2018[1] the petitioning creditor (Mr Black) seeks a sequestration order against the estate of Bernadette Mills (Ms Mills). The matter initially came before District Registrar Wall, who referred the petition to my docket on 7 May 2018.
[1] Filed on 5 March 2018. The petition was amended on 27 April 2018.
The petition asserts two debts totalling $12,921.36. The first debt is founded on a judgment of the NSW Local Court for $10,569.29 (and interest of $102.07), following a costs assessment for professional services said to have been rendered by Mr Black to Ms Mills. The second is an amount of $2,250 founded upon a certificate of taxation, following a costs order made by this Court on 22 July 2015 for costs thrown away in earlier bankruptcy proceedings brought by Mr Black against Ms Mills.[2]
[2] Black v Mills (No 2) [2015] FCCA 1973.
The petition is opposed by Ms Mills who ultimately relied upon an amended Notice of Grounds of Opposition annexed to an affidavit made by Ms Mills on 22 May 2018 and filed on 29 May 2018.
I heard the petition on 23 November 2018, at which time I was satisfied by Mr Black on the basis of his affidavit evidence that the formal requirements for a sequestration order had been met. The focus of attention then turned to the grounds of opposition advanced by Ms Mills. There are notionally three grounds of opposition in the amended Notice of Grounds of Opposition but in substance there are two. First, Ms Mills asserts that she is solvent. Secondly, Ms Mills asserts that there is no debt and invites the Court to go behind the judgment debt. Ms Mills denies that Mr Black was entitled to invoice her for the provision of legal services, which is how the debt arose.
For the purposes of the grounds of opposition, Ms Mills relies upon her affidavits made on 4 April 2018, 22 May 2018, and 17 July 2018.
Mr Black objected to the affidavit of 17 July 2018 being received on the basis that he was taken by surprise by it, it allegedly not having been served. Following the trial, and notwithstanding that he was represented by counsel at the trial, Mr Black sought to re-open the proceedings. Ms Mills is a litigant in person and has adopted the habit of emailing the Court regularly with material she considers has some bearing on the proceedings. My staff have sought to be diligent in ensuring that Mr Black was made aware of email correspondence that did not appear to have been copied to him and which was relevant to the proceedings. Given the state of the evidence, I gave the parties the opportunity to file additional evidence following the trial and make post-hearing submissions, which they have both done. Subject to that, judgment remained reserved.
I additionally received as evidence an email from Ms Mills dated 24 December 2018 annexing documents bearing on the issue of solvency. I also received as evidence documents attached to Ms Mills’ further email on 11 January 2019 evidencing her compliance with an undertaking she made, reflected in Order 3 made by me on 23 November 2018.
Mr Black relies upon his affidavits made on 20 June 2018, 7 September 2018, 10 September 2018 and 2 January 2019.
The following document was also tendered at the trial:
·Exhibit E1 – Certificates of Business Registration
In addition to providing pre-trial written submissions and making oral submissions through his counsel at the trial, Mr Black has also provided post-hearing submissions which I have considered.
Consideration
Solvency
Section 52(2)(a) of the Bankruptcy Act 1966 (Cth) makes clear that the Court may dismiss the petition if satisfied that Ms Mills is solvent. It is generally not appropriate to make a sequestration order against the estate of a solvent but recalcitrant debtor, noting that a sequestration order is not a form of debt recovery and involves a change of status.
At the trial, Ms Mills made various assertions of solvency from the bar table, including that she had had $11,493.38 in a Bankwest bank account (although that amount had reduced), owned two properties in Perth, had recently sold properties in Sydney, owned a $100,000 car and a $100,000 boat.[3] These assertions were not, however, reflected in the then available evidence and I provided Ms Mills with the opportunity to make good that omission. Documents subsequently provided by Ms Mills include a Bankwest bank statement of an account with a closing balance on 20 November 2018 of $315.35, a motor vehicle transfer document, a certificate of title for real estate in the name of Mills Secured Holdings Pty Ltd, a document evidencing the sale of a boat by the Mills Secured Trust for $52,000 in 2016 and a certificate of title for real estate in the name of Ms Mills at 2 Waterland Point, Quinns Rocks in Western Australia. The certificate of title discloses a mortgage to the Commonwealth Bank.
[3] Transcript, pages 17 and 38.
Mr Black submits that that evidence falls well short of establishing solvency. There is some force in that submission but there are other factors bearing on that issue. First, the debt due on the creditor’s petition is $12,921.36, which is a modest amount. Secondly, at the trial, Ms Mills undertook to pay to Mr Black the sum of $2,250 representing what I found was the indisputable component of the debt identified in the creditor’s petition, being the assessed costs thrown away in the earlier bankruptcy proceedings. I am satisfied from the document attached to Ms Mills’ email on 11 January 2019 that she has complied with her undertaking, demonstrating a capacity to pay a debt of at least that amount when due. Further, in earlier bankruptcy proceedings between these parties[4] an earlier creditor’s petition by Mr Black was dismissed by consent in circumstances where Mr Black had been able to recover the asserted debt by garnishee process in the NSW Local Court.
[4] Black v Mills (No 3) [2017] FCCA 380
Mr Black points out in his closing submissions that Ms Mills has, at an earlier time in the proceedings, asserted that she is a full time university student on a concession card who did not have $10,000 available to pay Mr Black. He does not dispute that she owns real estate (at 2 Waterland Point, Quinns Rocks, Western Australia) but notes the mortgage to the Commonwealth Bank and submits that on his evidence the property is mortgaged to 90 per cent of its estimated value.
In my view, while the evidence is not as clear as one would hope, Ms Mills has some cash resources available which have varied over time but which have at times exceeded $11,000. In my view, she enjoys some capacity to borrow. Given the small amount of the judgment debt remaining and Ms Mills’ payment of the costs thrown away in accordance with her undertaking, I am satisfied that she is solvent.
On that basis, the petition should be dismissed.
It is not necessary to deal with the other ground of opposition but I do make some observations on it. Ms Mills is a recalcitrant debtor. There are some unusual features of this case which helps to explain why this is so. A number of years ago, Ms Mills engaged Forshaws Neill Solicitors to act for her. She dealt with a Mr Carr and claims an agreement or understanding with him in relation to legal fees. Ms Mills denies that she ever agreed to Mr Black undertaking legal services for her and asserts further that due to the bankruptcy of Mr Carr, any fees due to the legal practice vested in Mr Carr’s trustee in bankruptcy. These were issues dealt with to some extent in the earlier legal proceedings in this Court in relation to the earlier creditor’s petition.[5]
[5] See in this regard Black v Mills (No 2) [2015] FCCA 1973 at [26]-[57] and Black v Mills (No 3) at [14]-[28]
Mr Black has been tenacious in pursuing costs which he asserts result from his own work as a solicitor. He has obtained a judgment but, given the doubt about the underlying facts and circumstances surrounding the provision of legal services, the bankruptcy of Mr Carr and the subsequent history of the legal practice, I would have been minded to go behind the judgment debt in the event that Ms Mills had been insolvent. It is not necessary to state conclusively what the outcome of that inquiry in relation to the judgment debt would be. Suffice to say that there is an issue of doubt as to whether there is a real debt owing to Mr Black.
Conclusion
The current petition will be dismissed.
I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Driver
Date: 28 February 2019
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