Bowles v Stratton

[2014] FCCA 2270

FEDERAL CIRCUIT COURT OF AUSTRALIA

BOWLES v STRATTON [2014] FCCA 2270

Catchwords:
BANKRUPTCY – Creditor’s Petition – no “other sufficient cause” – sequestration order made.

Legislation:

Bankruptcy Act 1966 (Cth), ss.33, 43, 43(1), 44(1), 47,52(1), 52(2)(a), 52(2)(b), 116(2)(g)

Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), rr.4.06(3), 4.06(4)

Olivieri v Stafford (1989) 24 FCR 413

Applicant: ROBIN GLYN BOWLES

Respondent: MELINDA MARGARET STRATTON

File Number: MLG 1528 of 2014

Judgment of: Judge Hartnett

Hearing date: 2 October 2014

Orders made: 2 October 2014

Delivered at: Melbourne

Delivered on: 17 October 2014

REPRESENTATION

Counsel for the Applicant: Mr Moon

Solicitors for the Applicant: Dwyer Bruce Legal Pty Ltd

The Respondent: In Person

ORDERS

1. There is leave to the Applicant to amend the Creditors Petition electronically filed on 25 July 2014 and stamped with a seal of filing dated 28 July 2014 at Part 1, paragraph 4, by deleting the date of 21 May 2014 and inserting in lieu the date of 14 July 2014.

2. Re-verification and re-service of the petition so amended be dispensed with.

3. A sequestration order be made against the estate of MELINDA MARGARET STRATTON.

4. The Applicant creditor’s costs be taxed and paid from the estate of the Respondent debtor in accordance with the Bankruptcy Act 1966.

The Court notes that the date of the act of bankruptcy is 14 July 2014.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1528 of 2014

ROBIN GLYN BOWLES

Applicant

And

MELINDA MARGARET STRATTON

Respondent

REASONS FOR JUDGMENT

1. Before the Court was a Creditor’s Petition filed by the Applicant on 28 July 2014. The Respondent, Ms Melinda Margaret Stratton, appeared by telephone link at her request. She had earlier filed a Notice of Appearance on 15 September 2014.

2. The Applicant applied to the Court for a sequestration order under s.43 of the Bankruptcy Act 1966 (Cth) (‘the Act’) against the estate of Melinda Margaret Stratton. The quantum of the debt stated was in the sum of $14,110.85 pursuant to a Judgment of the Family Court of Australia in Sydney (file number (P)SYC889 of 2008) dated 13 September 2013. The Bankruptcy Notice was served on the Respondent on 30 April 2014 and at hearing the date of the act of bankruptcy was amended, as provided for in orders numbered 1 and 2 of the Orders made on 2 October 2014, and was 14 July 2014. This was because the original date on the Bankruptcy Notice was 14 May 2014, but the Respondent debtor sought and obtained a number of adjournments in respect of her application to challenge the Bankruptcy Notice, and on each occasion until 14 July 2014, time for compliance with the Bankruptcy Notice was extended. Her application was at that time dismissed. Accordingly, pursuant to s.33 of the Act the Court granted leave to amend the Creditor’s Petition.

3. On the hearing of the matter, the Respondent had a copy of the Creditor’s Petition in her possession. The Respondent had also filed a Form 5 Notice stating grounds of opposition to application, interim application or petition on 15 September 2014 (‘the Form 5 Notice’). An Affidavit in Support sworn 9 September 2014 and filed on 15 September 2014 was relied upon by the Respondent. The grounds of opposition as set out in the Form 5 Notice were as follows:-

   “1. Ms Stratton has filed an appeal in the Family Court in Sydney: EA51 of 2013. Orders sought in this appeal include payment by Mrs Bowles to Ms Stratton of all Ms Stratton’s .costs associated with legal proceedings related to Mrs Bowles publication of the book ‘Have You Seen My Child’. This will result in a requirement that Mrs Bowles pay Ms Stratton’s debt associated with the costs order of 13 September 2013 in addition to costs related to adjournment of bankruptcy proceedings and bankruptcy proceedings.

   2. The costs order of 13 September 2013 was made unjustly, it is based on wrongful dismissal (by orders made on 12 April 2013) of Ms Stratton’s orders seeking injunctions restraining publication, sale and promotion of the book ‘Have You Seen My Child’ and orders seeking that the Family Court request the AFP investigate Mrs Bowles with the view to prosecution for breach of s121 of the Family Law Act 1975 as a result of her publication of the book

   3. Ms Stratton is seeking substantial damages for aggravated defamation against Mrs Bowles for the highly defamatory content of the book she published: ‘Have You Seen My Child’. Defamation proceedings are list in the Supreme Court in Sydney: 2013/178073. Damages will exceed any interlocutory costs orders.”

4. The Respondent also relied on the hearing of the Creditor’s Petition on two affidavits both sworn by her on 9 September 2014 and filed 15 September 2014 and Submissions dated 1 October 2014.

5. Part 2 of the Creditor’s Petition contains the Affidavit verifying the Creditor’s Petition sworn on 18 July 2014 by the Applicant. In addition, the Applicant relied upon the Affidavit sworn by Amanda Mason filed 28 July 2014, verifying paragraph 4 of the Creditor’s Petition.

6. The Applicant also relied upon the affidavits of search[1] and debt[2] by Ms Caitlin Bowden and the Applicant respectively, and both filed on 1 October 2014.

   [1] Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), r.4.06(3).

   [2] Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), r.4.06(4).

7. The Court notes the earlier Orders of 26 August 2014 of Registrar Pringle wherein personal service of the Creditor’s Petition was dispensed with, and service provided for otherwise as set out in those Orders. The Court is satisfied as to compliance with those Orders.

8. The Applicant also relied upon as evidence in the proceedings, the contents of an Affidavit sworn by Ms Caitlin Bowden on 24 September 2014.

Consideration

1. The Court has jurisdiction pursuant to s.43(1) of the Act. The Court is satisfied the Respondent debtor committed an act of bankruptcy on 14 July 2014 and was at the time personally present and ordinarily resident in Australia. Each of the conditions as set out in s.44(1) of the Act are satisfied. Verification as provided for in s.47 of the Act is before the Court. Those matters which the Court shall require proof as to, pursuant to s.52(1) of the Act, are established as described above in these Reasons.

2. The central issue for the Court is a consideration of those matters of which the Court can be satisfied by the Respondent debtor as set out in s.52(2)(a) and (b) of the Act. If the Court is so satisfied, it may exercise its discretion and dismiss the Creditors Petition.

Can the Respondent debtor pay her debts?

1. The Respondent on the evidence before the Court is not solvent. Her affidavit evidence did not address the issue of solvency. She indicated in submissions on the hearing her car had a value of approximately $3,000; her assets were otherwise approximately $1,500 maximum; and her debt to her family for legal costs is $350,000.  Indeed, the Respondent debtor conceded that her liabilities exceeded her assets; her income is a Centrelink Newstart Allowance; and that she is unable to pay her debts as and when they fall due.

Is there other sufficient cause a sequestration order ought not to be made?

1. The Respondent debtor put before the Court that it ought to be satisfied there is “other sufficient cause”.

2. On 24 September 2012, the Respondent debtor filed an Application in the Family Court of Australia (file number (P)SYC889 of 2008) (‘the FCA proceeding’) seeking an injunction restraining the Applicant from the ongoing publication of an electronic book. The application was heard on 9 January 2013.

3. On 12 April 2013, Loughnan J delivered Reasons for Judgment and made Orders dismissing the Respondent debtor’s application.

4. On 7 May 2013, the Respondent debtor applied for leave to appeal against the Orders made by Loughnan J on 12 April 2013 (‘the FCA appeal proceeding’).

5. On 12 August 2013, Loughnan J heard costs submissions arising from the Orders made on 12 April 2013.

6. On 2 September 2013, the Respondent debtor filed an Amended Notice of Appeal in the FCA appeal proceeding.

7. On 13 September 2013, Loughnan J delivered Reasons for Judgment in the FCA proceeding and ordered the Respondent debtor pay the Applicant the sum of $14,000 within six months.

8. On or about 12 June 2014, the Applicant became aware that the Respondent debtor had filed an Application to stay the orders made in the FCA proceeding on 13 September 2013.

9. On 19 June 2014, Loughnan J made Orders in the FCA proceeding staying the Orders made on 13 September 2013 conditional on the Respondent debtor seeking leave to appeal those Orders within 21 days of 19 June 2014 and upon the Respondent debtor diligently prosecuting the application for leave and, if leave was granted, the resultant appeal.

10. The Amended Notice of Appeal referred to in paragraph 17 above was filed by the Respondent debtor on 2 September 2013, being prior to the making of the costs Order on 13 September 2013. The Respondent debtor argued before this Court that the general order sought by her on appeal, and at an earlier point in time than the making of the 13 September 2013 costs Order, would cover all following costs orders that might be made. She had sought:-

    “any costs ordered against me by the other parties in relation to proceedings in the Family Court concerning publication of the book and in relation to appeal proceedings in the Family Court concerning publication of the book and in relation to appeal proceedings concerning publication of the book are hereby dismissed.”

11. The Orders made by Loughman J on 19 June 2014 were as follows:-

    “1. The operation of the orders made on 13 September 2013 be stayed pending the determination of an Appeal in relation to those orders.

    2. Order 1 is made on the condition that within twenty one (21) days from today’s date the applicant seeks leave to appeal in relation to those orders and secondly, that the applicant diligently prosecutes that application and if granted the resultant Appeal.”

    These Orders were formulated such that no appeal was considered by the Court to be on foot in relation to the costs Order made on 13 September 2013.  On the hearing of the stay application by Loughnan J on 19 June 2014, the Respondent debtor deposed that she was put on notice that she would need to amend her then current Notice of Appeal EA 51 of 2013 to include an appeal against the 13 September 2013 costs Order. The Respondent debtor claims she amended her Notice of Appeal EA 51 of 2013 to have any costs incurred in the proceedings related to the book paid by the other parties. However, the Eastern Appeals Registry would not accept the Amended Notice of Appeal and advised that the Respondent debtor was required to prepare a separate notice of appeal, summary of argument, appeal book index and appeal books to appeal against the 13 September 2013 costs Order.[3] The Respondent debtor then failed to satisfy the condition as set out in the Orders of Loughan J on 19 June 2014, as conceded by her. Those Orders are clear – if an appeal process was not commenced within the time stipulated, then the judgment debt became enforceable. Further, there is no basis to “go behind” the Judgment which is in evidence before the Court. There is no evidence to support a finding that the judgment is affected by fraud, collusion or a miscarriage of justice. There is thus in this argument not other sufficient cause.[4]

    [3] Affidavit of Ms Melinda Stratton sworn 9 September 2014 at [66].

    [4] Olivieri v Stafford (1989) 24 FCR 413.

12. The other matter put before the Court by the Respondent debtor as a basis on which the Creditor’s Petition should be dismissed was that the Respondent debtor has a “cross demand”, being defamation proceedings filed by her against the Applicant and other parties in the Supreme Court of New South Wales. The Respondent debtor is seeking a payment of damages. The Court notes such claim can still be prosecuted by the Respondent debtor despite being an undischarged bankrupt pursuant to s.116(2)(g) of the Act. However, the Respondent debtor put before the Court that this proceeding was a “set off” that would enable her to pay out the debt owed to the Applicant and result in a payment from the Applicant to her.

13. The Court observes the Supreme Court of New South Wales proceeding was filed by the Respondent debtor on 11 June 2012. Little happened in the ensuing two years to advance the matter, save as against the third, fourth, fifth and sixth defendants, the Statement of Claim was struck out. Ms Stratton appeared in Court for the first time on 7 April 2014, having not appeared before. On 7 April 2014, the presiding Judge noted that there had not been a diligent prosecution of the matter by the Respondent debtor.  The statement of claim needed to be amended. The Respondent debtor claims that has been done, but whether the proceedings shall remain on foot is uncertain. Currently, the Respondent debtor has not been granted permission to file her amended statement of claim. That remains outstanding to be determined judicially. In fact, the Respondent debtor claims to have two possible statements of claim. In these circumstances the Court cannot be satisfied, and on the evidence and lack thereof as put before the Court by the Respondent debtor, that the defamation proceeding will actually proceed; that it has a reasonable prospect of success; and that it will result in a payment of monies from the Applicant to the Respondent debtor. The Court is not satisfied by the debtor that for other sufficient cause a sequestration order ought not be made.

14. The Court makes a sequestration order against the estate of the Respondent debtor and costs shall follow the event.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Associate: 

Date:  17 October 2014