Boral Resources (Qld) Pty Limited v PETRESKI - [2009] FMCA 1048

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BORAL RESOURCES (QLD) PTY LIMITED v PETRESKI & ANOR

[2009] FMCA 1048

BANKRUPTCY – Creditor’s petition – other sufficient cause not to make sequestration order – whether demand for costs argued to be excessive constitutes other sufficient cause.

Bankruptcy Act 1966, s.52

Rozenbes v Kronhill (1956) 95 CLR 407
Cain v Whyte (1933) 48 CLR 639

Applicant:

BORAL RESOURCES (QLD) PTY LIMITED

First Respondent:

LUBE PETRESKI

Second Respondent:

SARAH JANE PETRESKI

File Number:

BRG 503 OF 2009

Judgment of:

Wilson FM

Hearing date:

27 August 2009

Date of Last Submission:

27 August 2009

Delivered at:

Brisbane

Delivered on:

27 August 2009

REPRESENTATION

Counsel for the Applicant:

Mr McQuade

Solicitors for the Applicant:

James Conomos Lawyers

Counsel for the Respondents:

Mr Harding

Solicitors for the Respondents:

Garland Waddington Lawyers

ORDERS

A Sequestration Order be made against the estate of LUBE PETRESKI and SARAH JANE PETRESKI.
The Applicant Creditor’s costs (including reserved costs, if any) be taxed and paid from the estate of the Respondent Debtors in accordance with the Bankruptcy Act 1966.

The Court notes that the date of the act of bankruptcy of LUBE PETRESKI is 16 July 2009.

The Court notes that the date of the act of bankruptcy of SARAH JANE PETRESKI is 20 July 2009.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 503 of 2009

BORAL RESOURCES (QLD) PTY LIMITED

Applicant

And

LUBE PETRESKI

First Respondent

SARAH JANE PETRESKI

Second Respondent

REASONS FOR JUDGMENT

On 27 July 2009 the applicant creditor presented a creditors’ petition against the respondent debtors. It sought a sequestration order against their estate, having regard to their commission of an act of bankruptcy in failing to comply with bankruptcy notices served on them respectively on 25 and 28 June 2009. The applicant creditor had earlier obtained a judgment in the Magistrates Court of Queensland on 5 June 2009 that remains unsatisfied.
On 21 August 2009 the respondents filed a notice of opposition to the petition, specifying two grounds:
(1)that they are solvent;
(2)that there is other sufficient cause why a sequestration order should not be made.
That latter ground was further particularised, relying on the fact that the amount claimed in the petition had been tendered to the solicitors for the applicant, and that the respondents had agreed to pay the applicant’s costs pursuant to the provisions of the Federal Magistrates Court (Bankruptcy) Rules.
On the hearing of this application objection was taken to parts of the affidavit of the male respondent that deal, in paragraphs 4 and 5, with the respondent’s asserted assets and liabilities. Those objections were conceded. As a consequence of that, counsel for the respondents did not press ground 1 of the notice of opposition. Rather he made the submission that there was no evidence that the respondents were in fact insolvent and that the evidence regarding their solvency was neutral.
As argument progressed, the substantive opposition to the petition was clarified. It was submitted that by demanding an unreasonable amount by way of costs as the creditor’s price for not pursuing the creditors’ petition, viewed in the context of the amount of the judgment debt and the attempts by the debtors to meet it, that constituted “other sufficient cause” within the meaning of s.52(2)(b) of the Bankruptcy Act 1966. Reliance was placed upon the joint judgment of the High Court in Rozenbes v Kronhill (1956) 95 CLR 407 at 408 and 417. Counsel for the applicant also drew attention to Cain v Whyte (1933) 48 CLR 639 at 646.
The history of this matter demonstrates that the applicant creditor obtained its default judgment, and then took a step towards executing that judgment by registering a writ against the respondents’ property. It presented bankruptcy notices and had them served, and when they were not complied with, presented a creditor’s petition. As well as that, the applicant’s solicitor has engaged in correspondence with the respondents’ solicitor regarding attempts made by the respondents to discharge their liability to the applicant. The applicant has twice been presented with cheques that have been dishonoured on presentation. It has offered a payment arrangement that was not complied with.
The request by the applicant’s solicitors of an amount for costs must be viewed against that background. The applicant’s solicitors on 28 July 2009 wrote to the former solicitors for the respondents, in which they stated that the applicant was prepared to dismiss the creditor’s petition with no court order for costs and remove or discharge its writ of execution if the judgment debt and accrued interest was paid, together with costs of $6397.17.
That item was described in their letter as:
Costs inclusive of the costs of dismissal of the creditor’s petition, removal of the writ, lodgement fee and discontinuance of claim number 4649/09.
Counsel for the respondents submitted that this was a wholly unreasonable request for costs, and pointed to a number of matters. First, it was not a reasonable estimate of the costs that were related to the bankruptcy proceedings. Secondly, there were in fact no costs of discontinuing the claim in the State Magistrates Court because it had been finalised by judgment. Thirdly, that the amount was excessive.
Thereafter, the solicitors for the respondents pressed to tender the amount of $4657.30, being the amount that had been claimed in the bankruptcy notices. Eventually, on 30 July 2009 a bank cheque in that amount was tendered. It was rejected. In that letter, the solicitors for the respondents stated:
We ask that the creditor’s petition (which has now been issued but not served) be dismissed on the basis that our client consents to paying your client’s costs of those proceedings pursuant to the provisions of rule 13.03(2) of the Federal Magistrates Court (Bankruptcy) Rules 2006 as agreed or assessed.
An assessment of costs was requested. The solicitors for the respondents demanded advice as to how the claim for $6397.17 was calculated. In their email letter of 30 July 2009 the solicitors for the applicant set out some of the filing fees that had been incurred, and noted that the amount claimed was not only in respect of the bankruptcy proceedings, but also for costs incurred in registering a writ against the respondents’ property, and costs that would be incurred in removing that writ.
The applicant’s solicitors made it quite clear that if the amount demanded was not received, they would pursue a sequestration order. The tender of the bank cheque was rejected.
As counsel for the applicant has submitted, all of the prerequisites of the Act have been satisfied in this case. There is a debt of sufficient amount, there has been service of a bankruptcy notice, and no submission is made that there is any technical deficiency in either that notice or the creditor’s petition. Rather, as I have said, the matter comes down to whether or not making the demand for costs and outlays constituted such an unreasonable request that it amounts to other sufficient cause within s.52(2)(b) of the Act.
In that regard, the respondents rely on the affidavit of Mr Quartermain, an experienced solicitor, who has estimated that if the petition were dismissed the applicant would be entitled to costs and outlays of some $3032.30. So much can be accepted. It must be remembered, however, that the applicant was seeking not only the costs of and incidental to the creditor’s petition, but also its costs related to the enforcement writ that it had issued.
Further, it does not appear to me to be unreasonable for the applicant to request, as its price for not pursuing its remedy of bankruptcy, its solicitor and own client costs. In his affidavit, the solicitor for the applicant has sworn that as at 28 July 2009 the applicant had incurred certain costs and outlays. Although these amounts are not quantified except as to outlays, the solicitor then says that the amount claimed of $6397.17 is a reasonable estimate of the costs that the applicant is entitled to.
In my view, the onus falls on the respondents to demonstrate that the amount claimed by the applicant is so unreasonable that it leads to the inference that the creditor is pursuing bankruptcy for some purpose that is not bona fide or legitimate. I am not so satisfied in this case. It is true that the amount of costs now outweighs the amount of the judgment debt, but that is not surprising, having regard to the amount of the judgment debt.
It is also unfortunate that the respondents can be bankrupted for a debt of less than $5000. I am cognisant of the fact that the legislature has evinced an intention to increase the amount of a debt for which a person can be bankrupted. However, I must deal with the law as it presently stands, and the applicants have a debt of sufficient amount to entitle them to pursue bankruptcy proceedings.
I am also cognisant of the fact that if they are made bankrupt the respondents will end up having to pay much more than even the amount claimed by the applicant because of the trustee’s charges and expenses. However, I am also mindful of the fact that the respondents had the opportunity of tendering the amount of $4657.30 when the bankruptcy notice was served on each of them, but did not do so. I am also aware that they have twice dishonoured cheques presented to the applicant.
In those circumstances I am not satisfied that there is other sufficient cause not to make a sequestration order. The applicant has today filed the affidavits of search and of debt. I make a sequestration order against the estate of each of the respondents. I note that the date of the act of bankruptcy for the first respondent is 16 July 2009, and for the second respondent, 20 July 2009.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Wilson FM

Associate: Lynnette Chin

Date: 4 November 2009