Body Corporate SP 31235U v Miao
[2014] FCCA 2457
•7 November 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BODY CORPORATE SP 31235U v MIAO | [2014] FCCA 2457 |
| Catchwords: BANKRUPTCY – Application for Review of orders, including Sequestration Order, made by a Registrar – applicant asserting solvency – applicant alleging fraudulent conduct by creditor and its solicitor – complaints about service – cross-claim asserted – all of debtor’s assertions misconceived or wrong – Registrar’s orders affirmed. |
| Legislation: Bankruptcy Act 1966, ss.52, 52(1), 52(2) |
| Totev v Sfar (2008) 167 FCR 193 Sandell v Porter (1966) 115 CLR 666 Cain v Whyte (1933) 48 CLR 639 Ling v Enrobook Pty Ltd (1997) 74 FCR 19 |
| Applicant: | BODY CORPORATE SP 31235U |
| Respondent: | SHIRLEY MIAO |
| File Number: | MLG 785 of 2014 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 17 September 2014 |
| Date of Last Submission: | 22 September 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 7 November 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Wenn |
| Solicitors for the Applicant: | Mills Oakley Lawyers |
| The Respondent: | In person |
ORDERS
The orders made by Registrar Allaway on 3 July 2014 are affirmed.
The application for review is dismissed.
The costs of the petitioning creditor be paid out of the estate of the bankrupt in accordance with the Bankruptcy Act 1966.
THE COURT NOTES THAT:
(A)The date of bankruptcy is 28 March 2014.
(B)A consent to act as trustee has been signed by STEPHEN JOHN MICHELL.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 785 of 2014
| BODY CORPORATE SP 31235U |
Applicant
And
| SHIRLEY MIAO |
Respondent
REASONS FOR JUDGMENT
On 3 July 2014 Registrar Allaway made a Sequestration Order against the estate of Ms Shirley Miao and associated cost orders. The matter now before the court is the review application made by Ms Miao of the Registrar’s order.
Although the proceedings commenced with a Creditor’s Petition filed by Body Corporate SP31235U (“Body Corporate”), in the circumstances it is convenient to treat Ms Miao as the applicant and Body Corporate as the respondent.
The applicant has advanced numerous criticisms of the respondent’s conduct, which gave rise to the making of the Sequestration Order. She has asserted that she is solvent and she has advanced other matters to support her opposition to the making of the Order.
For the reasons that follow none of the applicant’s criticisms are made out, and it follows that I will affirm the orders made by the Registrar and dismiss the application for review with costs.
The procedural history of the matter
In order to understand the various matters that the applicant has put forward, it is necessary to explain how it is that the proceeding progressed.
On 29 April 2014 the Creditor’s Petition was filed. A total debt of $59,495.17 was asserted relying upon Magistrates’ Court orders, dated 21 July 2011, 4 August 2011, and 18 June 2012. The Part 2 affidavit verifying the Creditor’s Petition was executed.
An affidavit of search was also filed, and that affidavit itself annexed affidavits of service of the Bankruptcy Notice together with a copy of the same. From those documents it is clear that Registrar Caporale had made orders for substituted service of the Bankruptcy Notice on 10 February 2014. It is also obvious from the Bankruptcy Notice itself that each of the orders of the Magistrates’ Court upon which the Bankruptcy Notice was founded, made on 21 July 2011, 4 August 2011 and 18 June 2012 all involved cost orders against the applicant.
On 26 May 2014 Body Corporate applied for orders for substituted of the Creditor’s Petition, relying upon an affidavit of Ms Stella Mascoulis, solicitor, filed on the same date.
Ms Mascoulis deposed to the various endeavours she had made or supervised to effect service, including relevantly a conversation with somebody from Peter K Real Estate, in which, according to Ms Mascoulis, the representative of Peter K Real Estate had undertaken to forward documentation to the applicant.
On 13 June 2014 Registrar Pringle made an order for substituted service as sought. In compliance with the orders then made, Ms Mascoulis and Ms Lynette Harding, also employed by the solicitors for Body Corporate, filed affidavits of service on 17 June 2014.
On 30 June 2014 the applicant filed a Notice of Appearance and a Notice Stating Grounds of Opposition, and two affidavits. It will be necessary to return to those affidavits in due course. The applicant filed a further affidavit on 1 July 2014 essentially repeating the matters to which she had already deposed.
On 3 July 2014 Body Corporate filed a further affidavit of search and a further affidavit of debt, and, as indicated, Registrar Allaway made the Sequestration Order now the subject of review.
The Application for Review was filed on 15 July 2014, together with a supporting affidavit from the applicant. She filed a supplementary affidavit on 28 July 2014.
On 28 August 2014 Mr Frank Gerace, a real estate agent and owners corporation manager of the respondent, filed an affidavit.
On 11 August 2014 I made interlocutory orders preparing the matter for trial. In accordance with those orders, on 9 September 2014 the applicant filed a Notice of Intention to Cross-examine Mr Gerace and Ms Mascoulis.
The applicant filed an affidavit replying to Mr Gerace’s affidavit on 12 September 2014.
At the hearing on 17 September 2014 the respondent filed a further affidavit of debt and a further affidavit of searches.
The applicant also filed, without leave, a further affidavit on 22 September 2014.
The significance of this slightly lengthy trawl through the materials filed will hopefully become apparent in due course.
The section 52(1) Bankruptcy Act matters
This proceeding is a hearing de novo (see Totev v Sfar (2008) 167 FCR 193). Accordingly, the Court is first required to be satisfied in the matters set out in s.52 of the Bankruptcy Act 1966 (“the Act”).
I am quite satisfied that the matters stated in the Petition, as verified in the affidavit verifying the petition itself, are proved. In saying this, however, I should emphasise that there is criticism made of the form of the Petition to which I will return.
Although, once again, there is dispute about the way it came to pass, to which I shall return, there is in the circumstances no question as to the service of the Petition. Likewise there is no question that the debts upon which the Creditor’s Petition relies are still owing.
Although, as I say, there are aspects of these matters that are disputed, with which I shall deal, it is sufficient for present purposes to say that I am quite satisfied as to the s.52(1) matters. Were it necessary to do so I would have no hesitation in waiving compliance with r.4.06 of the Federal Circuit Court (Bankruptcy) Rules 2006 (“the Bankruptcy Rules”) in any event.
This finding of course enlivens the Court’s discretion pursuant to s.52(2) of the Act, and at this point it is appropriate to examine the matters advanced in opposition from time to time by the applicant.
The applicant’s objections
The applicant’s notice stating grounds of opposition filed 30 June 2014 asserts relevantly that the orders upon which the Bankruptcy Notice (and thereafter the Petition) made by the Magistrates’ Court of Victoria had been stayed in a final judgment made on 30 July 2013 by the Supreme Court of Victoria. The notice also asserts fraudulent conduct on the part of Mr Gerace and his lawyers, Mills Oakley Lawyers. It is asserted that the Magistrates’ Court judgments were not final judgments.
In her affidavit filed 30 June 2014 “For Notice Stating Grounds of opposing to Petition” the applicant deposes to an order made by Justice Mukhtar in the Supreme Court on 10 September 2012 that the Magistrates’ Court orders be stayed. She further deposed that she obtained a final judgment from Derham AsJ on 30 July 2013 and described the stay as “Stay execution of the order made by The Magistrates’ Court at Sunshine in case number U00919045”.
The applicant deposed (although this was in substance, of course, a submission) that “the Magistrates’ Court at Sunshine orders execution have been stayed by the Supreme Court of Judge Victoria final judgment”.
The affidavit went on to accuse Mr Gerace and Mills Oakley Lawyers of acting in collusion to use “fraudulent final orders” to issue the Bankruptcy Notice. The affidavit contains a certain amount of irrelevant material but did relevantly assert that:
“The Applicant doesn’t serve documents to the Respondent and uses technical tricks in order to make Respondent is unable to file and serve relevant documents for petition hearing 3 days before hearing.”
In the other affidavit filed on 30 June 2014 “for Application to Set Aside Bankruptcy Notice” the applicant again traversed the orders made by the Supreme Court. Unlike the previous affidavit, copies of the orders of the Supreme Court are annexed.
After largely repeating the terms of the first affidavit, the applicant went onto complain of the process whereby substituted service orders had been obtained. She said that she had been overseas from March 2013 to March 2014 and had not avoided any documents as the respondents “stated in their sworn affidavits”.
The affidavit went onto make complaint about the conduct of Mr Gerace in allegedly failing to provide a body corporate certificate in accordance with VCAT orders made on 22 February 2013. The affidavit asserted that Mr Gerace was in contempt of VCAT orders. The affidavit went onto depose to conversations allegedly held between the applicant and Ms Mascoulis, and complaints about an alleged avoidance by Ms Mascoulis of the applicant.
The affidavit went onto assert a counter-claim exceeding the amount claimed in the Bankruptcy Notice. The counter-claim is not entirely easy to understand, but would appear to comprise alleged possible loss and damage arising out of the tenancy that the applicant asserts with a tenant of a property she owns, of which the respondent is the relevant body corporate.
The total amounts claimed by the applicant as damages amounted to almost $700,000. It was deposed that an application in respect of this damage had been filed with the Victorian Civil and Administrative Tribunal (“VCAT”).
The further affidavit filed on 1 July 2014 by the applicant in my view adds nothing of any moment.
The applicant’s next affidavit filed on 15 July 2014 asserts that the applicant was not insolvent when the Sequestration Order was made by Registrar Allaway. The applicant deposed at paragraphs 1 and 2:
“1. The Applicant can arrange funds to pay this outstanding body corporate charge.
2. The Applicant’s premises has been for sale since 2011 to pay off this outstanding Owners corporation charge. This premises is located in Central Business District Footscray. Several buyers gave offers to purchase it.”
The applicant asserted at paragraph 3 of this affidavit that the costs order in the original 21 July 2011 Order made by Magistrate Fitzgerald in the Magistrates’ Court at Sunshine was not for the correct amount. The applicant exhibited RSM2 as a true copy of the original order made by Magistrate Fitzgerald.
The affidavit went onto complain that Mr Gerace had failed to provide a body corporate certificate pursuant to provisions of the Owners Corporation Act 2006 despite repeated requests to do so.
The applicant deposed that she had applied to VCAT, and she exhibited RSM-3, being a copy of an Order made by Senior Member Vassie. The applicant deposed that Mr Gerace had not obeyed this Order and was therefore in contempt of court. The applicant then went onto depose to the fact that the grounds in support of the applications for substituted service was untrue and denied the conversation between Ms Mascoulis and the representative of Peter K Real Estate to which I have earlier referred. The affidavit went onto make accusations of fraudulent oaths by Mr Gerace and Ms Mascoulis to obtain the substituted service orders. Some of the other matters asserted in the affidavit are, in my view, not relevant.
The supplementary affidavit filed by the applicant on 28 July 2014 accuses Mr Gerace of corruption, theft and dishonesty in broad ranging terms.
The affidavit filed by the applicant on 12 September 2014 does not, in my view, take the matter further.
The affidavit filed on 22 September 2014 responds to the respondent’s outline of submissions filed in Court.
The affidavit of Mr Gerace
Mr Gerace’s affidavit filed 28 August 2014 deposes that he represents the managing agent of the respondent, that he was authorised to make the affidavit on the respondent’s behalf, and that he did so from “my knowledge of the Respondent’s file and the long history of this matter”.
Mr Gerace confirmed that the debt upon which the petition was based has not been paid and took issue with Ms Miao’s assertion of solvency.
At paragraphs 6 and 7, Mr Gerace deposed:
“6. Ms Miao states at paragraph 4 of her First Affidavit that because I have not provided her with a section 151 Owners Corporation Certificate she has been unable to sell the premises at 2.144-148 Nicolson Street, Footscray. I have always been ready, willing and able to supply the relevant certificate to Ms Miao upon her payment of a prescribed fee of $150.00. Ms Miao attended my office yesterday and paid the said fee.
7. I note that the orders of Member Vassie exhibited to Ms Miao’s First Affidavit at “RSM-3” clearly stipulate the payment condition upon my provision of the said certificate.”
Mr Gerace otherwise responded to the applicant’s serious allegations against him as being:
“…embarrassing, scurrilous, mischievous, baseless and ought to be struck from the Court record… I vehemently deny any impropriety in the conduct of my role as Owners Corporation Managing Agent of the Respondent.”
The evidence given at court
Mr Gerace was called. He referred in evidence-in-chief to the issue of the owners certificate proceeding in VCAT two years ago. He said that the member made an order that once the applicant pays $150, the respondent should provide the required certificate. He said that the applicant had not paid until 29 August 2014 and the certificate will be ready to be collected by 5 September 2014. He deposed that he had been in the Supreme Court the previous day and that Associate Justice Mukhtar had observed that “we done what we should”.
Under cross-examination by the applicant (and it was clear that the two had a strained relationship) Mr Gerace repeated that the VCAT order clearly said that the owners corporation certificate was only to be provided once the $150 was paid. He said: “You failed to do so until August.”
Mr Gerace repeated that he had not given the certificate because the fee had not been paid. He said, “We get 10 business days to prepare the certificate” and, of course, this would have run from 29 August 2014. He confirmed that he has the order made by Senior Member Vassie and he was not prepared to provide the certificate before Ms Miao paid.
He denied bankrupting the applicant to get her money.
When it was put to him that the certificate did not have the common seal of the body corporate or his true signature, Mr Gerace confirmed that it was indeed his signature. He says it is not his practice to append the common seal and that this had never been a problem with other certificates he had issued.
When challenged as to his authority to act, he said he was appointed to manage the property. He said this is recorded in the minutes of the meeting appointing him. Annual general meetings of the body corporate repeat this authority. He said it was his obligation to pursue arrears. He confirmed that a resolution had been passed to bankrupt the applicant and he was present at that meeting. There was also resolution to pursue the applicant and the arrears that she owed.
I should interpolate and say that Mr Gerace was an excellent witness whose evidence was clearly truthful and which I accept.
Ms Stella Mascoulis was next called and was subjected to a number of questions about the service issues to which I have referred. It is not necessary to record the exchanges between Ms Mascoulis and the applicant in any detail. Ms Mascoulis was an excellent witness whose answers were clearly truthful. I have no hesitation in accepting her evidence.
Given the nature of the allegations made against Ms Mascoulis, who is a practising lawyer, I should in these circumstances make it wholly clear that I do not accept any assertions of misconduct put against her at all.
Consideration of the matters the applicant raised
The first matter the court should consider in this case is whether the applicant has established solvency. In order to establish solvency the court has to be satisfied that the debtor is able to pay her debts on the basis of cash resources immediately available or money which can be obtained from alternative sources within a relatively short time. It is not necessary to repeat the well known passage in Sandell v Porter (1966) 115 CLR 666, in which Barwick CJ set out the terms of this test. They are in any event recorded at paragraph 10 of the respondent’s written submissions. All that the applicant has said by way of her finances is that the property over which this dispute has arisen would be worth $700,000 in clear funds in the event that it was sold (I am not sure that this is asserted in terms, but will give the applicant the benefit of the doubt). She has not completed a Statement of Affairs, nor given any other details of her financial circumstances. She has not paid the debts giving rise to this proceeding even though they have been outstanding for years. It should be noted that the applicant’s affidavit filed 15 June 2014 appears to concede that a debt is owing- (“the applicant can arrange funds to pay this outstanding body corporate charge”).
Although the applicant has deposed that a purchaser has offered to buy the property (paragraph 3, affidavit filed 12 September 2014), the respondent is correct to submit, as it does in written submissions, there is no evidence to verify that offer or the terms upon which it may have been made. Exhibit RSM-1 to the affidavit of the applicant filed 15 July 2014 merely confirms that the property has been for sale. The materials filed by the applicant simply do not persuade me that she is able to pay her debts within the expanded definition in Sandell v Porter.
The next matter to which I turn is the applicant’s assertion that the Magistrates’ Courts orders are the subject of a stay. While it is clear that the order of Mukhtar AsJ made on 10 September 2012 did stay the Magistrates’ Court’s orders pending further order, it is equally clear that the order made by Derham AsJ on 30 July 2013 discharged that stay (see order 2 made by Derham AsJ). It is plain that the applicant was wholly unsuccessful in that proceeding. The stay ordered in order 6 of Derham AsJ’s orders was clearly a standard stay for 30 days, presumably to enable the applicant to appeal should she so have desired. There is no evidence that that order was ever extended.
Accordingly the applicant’s proposition is wholly misconceived.
The next matter to which I turn is the assertion that there was not a costs order made by Magistrate Fitzgerald. It is quite clear from the sealed copies of the court’s orders annexed to the Bankruptcy Notice that cost orders were made, as I have already indicated. It is true that the copy of the order annexed by the applicant does not contain a cost order, but, as the respondent’s written submissions correctly observe, that is not a sealed or authenticated version of the order. This criticism is without merit.
The next matter I will deal with is the applicant’s assertion that she has suffered loss and damage in an amount equal to or greater than the amount claimed. This involves two subparts.
The first subpart is the implicit assertion of loss and damaging arising out of the failure alleged by the applicant on the part of the respondent to provide the owners corporation certificate. It is quite clear from Senior Member Vassie’s order that the payment of the fee had to predate the provision of the certificate.
I have already indicated that I accept Mr Gerace’s evidence. I accept that he correctly construed the order of Senior Member Vassie. I also accept his evidence that Mukhtar AsJ had, the day before the hearing before this Court, affirmed the propriety of his conduct.
Insofar as the cross-claim of almost $700,000 is concerned, it is not possible on the applicant’s material before the Court to accept that she has a counter-claim exceeding the value of the original debt. It is clear from the materials filed that some sort of proceeding is underway before VCAT. The parties are plainly experienced in litigation between them. It is wholly impossible to evaluate the force of any claim from the affidavit material that the applicant has filed.
The alleged fraudulent behaviour of Mr Gerace and his lawyers is a matter that can be dealt with shortly. I have already indicated that I accept the evidence of Ms Mascoulis. There was no impropriety in the process whereby the orders for substituted service were made.
Insofar as the applicant has deposed to fraud and misconduct generally on the part of Mr Gerace these matters are, in my view, scandalous and should indeed be summarily dismissed. They are in any event wholly irrelevant to the matters before the Court.
Should a Sequestration Order be made
It should be noted that the authorities make it clear that once an act of bankruptcy has been committed a creditor is prima facie entitled to a Sequestration Order (see Cain v Whyte (1933) 48 CLR 639) and it is for the applicant to prove that there is sufficient cause why a Sequestration Order should not be made (Ling v Enrobook Pty Ltd (1997) 74 FCR 19). Further, even if the matters in s.52(1) of the Act are not made out and even, indeed, if the applicant was solvent, the court still retains discretion to make a Sequestration Order.
Given that I am wholly unsatisfied that the applicant is solvent, and that her other criticisms advanced by way of opposition to the Petition are misconceived, or baseless, or not made out, as the case may be, it is absolutely clear that a Sequestration Order should issue.
Conclusion
In the circumstances, I will affirm the orders made by Registrar Allaway and dismiss the application for review with costs.
I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.
Associate:
Date: 7 November 2014
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