Body Corporate for Sanderling at Kings Beach v Samsakopoulos

[2019] FCCA 2133

FEDERAL CIRCUIT COURT OF AUSTRALIA

BODY CORPORATE FOR SANDERLING AT KINGS BEACH v SAMSAKOPOULOS

[2019] FCCA 2133

Catchwords:

BANKRUPTCY – Application to review decision of registrar – hearing de novo – petitioning creditor not proving its case.

Legislation:

Bankruptcy Act 1966 (Cth), s.44

Federal Circuit Court Bankruptcy Rules 2016 rr.4.06(1), 4.06(2), 4.06(3), 4.06(5)

Federal Circuit Court Rules 2001, Pt.20

Cases cited:

Totev v Sfar (2008) 167 FCR 193

Applicant:

BODY CORPORATE FOR SANDERLING AT KING BEACH

Respondent:

VICTORIA SAMAKOPOULOS

File Number:

BRG 771 of 2018

Judgment of:

Judge Jarrett

Hearing date:

12 July 2019

Date of Last Submission:

12 July 2019

Delivered at:

Brisbane

Delivered on:

17 July 2019

REPRESENTATION

Counsel for the Applicant:

Mr Topp

Solicitors for the Applicant:

Strata Legal Queensland

The Respondent appeared in person

ORDERS

(1)     The orders made on 1 November, 2018 be set aside.

(2)     The creditor’s petition filed on 30 July, 2018 is dismissed.

1. FEDERAL CIRCUIT COURT

OF AUSTRALIA

AT brisbane

No. BRG 771 of 2018

body corporate for sanderling at kings beach

Applicant

And

VICTORIA samakopoulos

Respondent

REASONS FOR JUDGMENT

1.      On 1 November 2018, Registrar Buckingham made a sequestration order against the estate of the applicant.  On 11 April 2019, she applied for a review of the Registrar’s decision. 

2.      In Totev v Sfar (2008) 167 FCR 193, the Full Court of the Federal Court of Australia reminded trial judges of the nature of a review such as that now before me. A review of a registrar’s decision pursuant to Part 20 of the Federal Circuit Court Rules2001 (Cth) is a hearing de novo. At pages 196 – 197 of the decision to which I have referred, Emmett J says this:

12. A hearing de novo is different from an appeal stricto sensu and is different from an appeal by way of rehearing. In the case of an appeal stricto sensu, the question would be whether, upon the material before the registrar, the conclusion reached by the registrar was correct. In an appeal by way of rehearing, the appellate court would rehear the matter as at the date of the appeal, but on the evidence called before the registrar, subject to a power to receive further evidence where appropriate: the rights of the parties would be determined by reference to the circumstances, including the law, as they existed at the time of rehearing (Harris v Caladine 172 CLR at 125). In each case any question concerning the exercise of discretion would be subject to the restrictions imposed on an appellate court in reviewing the exercise of a discretion (see House v The King (1936) 55 CLR 499).

13. In the case of a hearing de novo, however, the judge reviewing the order begins afresh and exercises for himself or herself any discretion exercised by the registrar. The parties commence the proceeding again, subject to any rules concerning the use of evidence adduced before the registrar. The hearing de novo involves the exercise of the original jurisdiction and the petitioner, in the case of a bankruptcy petition, must start again, call witnesses and make out the petitioner’s case (Harris v Caladine 172 CLR at 124).

14. Because the hearing of an application for review of a sequestration order is a hearing de novo, it would not be sufficient for the reviewing judge to be satisfied that the registrar made no error and simply to dismiss the application for review. The judge who hears the review application must hear the petition afresh and must be satisfied as to the matters referred to in s 52 of the Bankruptcy Act. Thus, the reviewing judge must herself or himself be satisfied with the proof of:

•          the matters stated in the petition;

•          the service of the petition; and

•           the fact that the debt or debts on which the petitioning creditor relies is or are still owing.

The reviewing judge must also exercise afresh the discretions conferred by s 52(2).

15. In particular, unless the Bankruptcy Rules are waived, the judge must have the affidavits referred to in r 4.06 of the Bankruptcy Rules, which must be sworn shortly before the hearing. Except in the case of a review on the same day as the sequestration order was made, the affidavits relied upon before the registrar would not satisfy r 4.06. In the absence of fresh affidavits, it would be necessary that compliance with the Bankruptcy Rules be waived.

3.      There is no application before me for waiver of any of the Bankruptcy Rules.  Rule 4.06 of the Federal Circuit Court Bankruptcy Rules 2016 requires a number of matters.  Subrule 4.06(1) says that:

Before the hearing of a creditor’s petition, the applicant creditor must comply with this rule.

4.      Relevantly, the applicant creditor by subrule 4.06(3):

…must file an affidavit, of a person who has, no earlier than the day before the hearing date for the petition, searched, or caused a search to be made, in the National Personal Insolvency Index, that:

(a)      sets out the details of any references in the Index to the   debtor; and

(b)      states that there were no details of a debt agreement,   about the debt on which the applicant creditor relies, in   the Index:

(i)       on the day when the petition was presented; and

(ii) on the day when the search was made; and

(c)       has attached to it a copy of the relevant extract of the Index.

5.      Further, subrule 4.06(4) requires that:

The applicant creditor must file an affidavit of a person who knows the relevant facts that:

(a)      was sworn as soon as practicable before the hearing date        for the petition; and

(b)      states that each debt on which the applicant creditor   relies is still owing.

6.      Subrule (5) requires that:

If a debt stated in the petition is an amount payable to the applicant creditor under a judgment of a court that ordered the amount to be paid into the court, the applicant creditor must file an affidavit:

(a)      of a person who has, not earlier than the day before the   hearing date for the petition, searched in the proper   office of the court; and

(b)      that states whether the amount of the debt (or part of that   amount) has been paid as ordered.

7.      Here there are no affidavits that answer those descriptions.  There was an affidavit filed by Jodie Collie on 10 July, 2019 (so within two days of the hearing before me on 12 July, 2019) but for reasons which I will explore shortly it does not depose to the existence of the relevant debt.  The failure by the petitioning creditor to comply with rule 4.06 is fatal to the application.  As I earlier remarked, there was no application to waive compliance with the rules before me and, as Totev v Sfar makes clear, the obligation on a judge hearing a review such as the present is to start afresh.

8. Beyond those matters which some might describe as technical, there is a matter of more substance which also means that this creditor’s petition must be dismissed. To secure the making of a sequestration order, there must be a debt in existence as at the date of the making of the sequestration order which is more than the statutory required minimum, that is, $5000: see s.44(1) of the Bankruptcy Act 1966 (Cth). On the day the sequestration order was made by the Registrar here, it was said that there was a debt in the order of a little over $5001.

9.      The affidavits of debt of Jodie Collie filed on 3 October, 2018 and 29 October, 2018 and then again on 31 October, 2018 indicate some real reason to be circumspect about just how much it is that the applicant is owed by the respondent, if anything.  In the affidavit that was sworn on 3 October, 2018 Ms Collie said that since 12 September 2018, the applicant creditor had received payment of $77.25 and no more.  There is a positive deposition that the balance of the debt on which the applicant creditor then relied was $5001.76 and was then still owing.  There was then another affidavit sworn by the same deponent on 31 October 2018.  It is to the same effect. 

10.    There is an affidavit by Jodie Collie sworn on 10 July, 2019.  It refers to a supplementary affidavit affirmed by her on 29 October 2018.  That affidavit talks about credits that should be allowed in the applicant’s favour to take account of payments that the petitioning creditor concedes were made by her on her account but which did not appear in the document which was described in Ms Collie’s affidavit as a “current account” for the respondent.  By her latest affidavit, Ms Collie suggests that the only amount received by the petitioning creditor from the debtor since her earlier affidavits was $77.25.  Annexed to her affidavit is what she says is the:

…complete owner current account going back to 1 May 2010 and printed on 8 July 2010.

11.    That document according to her evidence purports to be a statement which:

…clearly shows that the current indebtedness of the Respondent is in the sum of $17,791.90.

12.    The submissions made by the petitioning creditor in support of its opposition to the application for review suggests that that is the relevant debt for present purposes and, more than that, when the sequestration order was made, the relevant debt was some $15,000. 

13.    The current account document attached to the 29 October affidavit and the most recent affidavit of Ms Collie is a curious document indeed.  It is difficult to understand and there was no attempt made to explain how one would go about interpreting that document.  Across the top of the page at the commencement of the current account are some headings.  The headings appear as thus:

Date

Details

Administrative
Fund due/paid

Sinking Fund
due/paid

Unallocated

Interest
paid

Total

Balance
(-)prepaid

14.    Presumably, it is said that the amount that appears under the column “Balance (-) pre-paid” is the amount that might be owed at any given point in time by the applicant to the petitioning creditor.  But the difficulty with taking that statement at face value is that it conflicts with the two affidavits of debt sworn by Ms Collie in October last year.  She swears the debt upon which the petitioning creditor relies was a little over $5000.  No explanation is given as to why she would make such a deposition when, in fact, there was an amount owing to the petitioning creditor which, according to her most recent affidavit and the submissions made for the petitioning creditor, was far in excess of that.

15.    Moreover, there is no evidence at all about the basis upon which any of the amounts set out in the current account accrue.  There is no evidence about when they are due to be paid or when they are payable.  And that is important because, for example, when one looks at the affidavit of 29 October, 2018 and the current account document annexed there, the very last entry includes an entry which is dated 1 May, 2019 for a period 1 May, 2019 to 31 October, 2019 but yet the affidavit was sworn on 29 October, 2018.  It seems somewhat anomalous that as at 29 October, 2018 an amount which appears in that current account as having an entry date of 1 May, 2019 for a period commencing then and ending in October, 2019 would appear in the statement which purportedly is dated 29 October, 2018 that is to say, the date of swearing of the affidavit.  None of that was explained. 

16.    As Totev v Sfar makes clear, the onus is on the petitioning creditor to establish its entitlement to the making of a sequestration order.  The Court must be satisfied that there is a debt owed by the debtor to the petitioning creditor which is more than the statutory minimum.  Here, I cannot be so satisfied.  There are two reasons for that.  The first is the applicant swears that she paid $80 off what she says was owed and what the petitioning creditor says was owed before the sequestration order was made.  That would have reduced any amount owing by her to less than the statutory minimum.

17.    For reasons that again are not explained, the petitioning creditor only credits the applicant before me with $77.25.  There was some suggestion from those at the Bar table that there might be bank fees and things involved to explain the difference but guessing is not good enough.  Bankruptcy affects the status of people and it is for that reason that the casebooks are replete with a very careful approach to the making of a sequestration order. 

18.    The applicant’s evidence that she had paid $80 was not challenged, there was no request that she be cross-examined and I accept her evidence.  Having accepted her evidence, it is clear on the basis of the depositions of Ms Collie in October last year the debt upon which the petitioning creditor relies is less than the statutory minimum.

19.    To the extent that the petitioning creditor seeks to rely on a greater amount now having regard to the current account, the petitioning creditor does not discharge the onus of proof on it to prove on the balance of probabilities that the respondent before me owes to the petitioning creditor an amount in excess of $5000. 

20.    For all of those reasons, I am not satisfied that it is appropriate to make a sequestration order against the applicant for review.  The petitioning creditor does not prove its case.  The order made on 1 November 2018 is set aside.  The creditor’s petition filed on 30 July 2018 is dismissed.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Judge Jarrett.

Date: 8 August, 2019