Burgess v Permanent Custodians Ltd

Case [2010] FCA 986

FEDERAL COURT OF AUSTRALIA

Burgess v Permanent Custodians Ltd [2010] FCA 986

Citation: Burgess v Permanent Custodians Ltd [2010] FCA 986
Appeal from: Permanent Custodians Ltd v Burgess [2010] FMCA 258
Parties: NARELLE SUSAN BURGESS v PERMANENT CUSTODIANS LTD
File number: NSD 349 of 2010
Judge: FLICK J
Date of judgment: 8 September 2010
Catchwords:

BANKRUPTCY – making of sequestration order – onus on debtor

PRACTICE AND PROCEDURE – failure of appellant to appear – appeal heard in absence of appellant – failure to comply with undertaking – no error on the part of the Federal Magistrate
Legislation: Bankruptcy Act 1966 (Cth), s 52
Federal Court of Australia Act1976 (Cth), s 25(2B)
Federal Court Rules, O 52 r 38A   
Cases cited: Bryant v Keith Harris & Co Ltd (1980) 49 FLR 137, cited
Commissioner of Taxation v Cumins [2008] FCA 353; 101 ALD 78, cited
Knight v Beyond Properties Pty Ltd [2010] FCA 337, distinguished
National Mutual Holdings Pty Ltd v Sentry Corp (1988) 19 FCR 155, cited
Permanent Custodians Ltd v Burgess [2010] FMCA 258, affirmed
Re Verma; Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 181, applied
St George Bank Limited v Helfenbaum [1999] FCA 1337, applied
SZISM v Minister for Immigration and Citizenship [2007] FCAFC 61, 158 FCR 292, cited
Date of hearing: 24 August 2010
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 46
Solicitor for the Respondent: Gadens Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

NSW DISTRICT REGISTRY

GENERAL DIVISION

NSD 349 of 2010
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

NARELLE SUSAN BURGESS
Appellant
AND:

PERMANENT CUSTODIANS LTD
Respondent

JUDGE:

FLICK J

DATE OF ORDER:

8 SEPTEMBER 2010

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The Notice of Motion as filed on 21 April 2010 is dismissed.

2.The Notice of Motion as filed on 3 August 2010 is dismissed.

3.The Notice of Appeal as filed on 6 April 2010 is dismissed.

4.The Appellant is to pay the costs of the Respondent of and incidental to the proceeding, as agreed or taxed, including the costs of the interim applications dated 21 April 2010 and 3 August 2010 (together with any reserved costs), with such costs to be paid in priority in accordance with s 109(1) of the Bankruptcy Act1966 (Cth).

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.


IN THE FEDERAL COURT OF AUSTRALIA

NSW DISTRICT REGISTRY

GENERAL DIVISION

NSD 349 of 2010
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

NARELLE SUSAN BURGESS
Appellant
AND:

PERMANENT CUSTODIANS LTD
Respondent

JUDGE:

FLICK J

DATE:

8 SEPTEMBER 2010

PLACE:

SYDNEY

REASONS FOR JUDGMENT

  1. On 19 March 2010 a Federal Magistrate refused the present Appellant an adjournment of the hearing of an amended creditor’s petition and made a sequestration order against her estate:

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AGLC
Burgess v Permanent Custodians Ltd [2010] FCA 986
Case
[2010] FCA 986
Decision Date

CaseChat Overview and Summary

Burgess v Permanent Custodians Ltd was a case heard by the Federal Circuit Court of Australia. Mrs Burgess, the appellant, had filed an appeal against a sequestration order made by the Federal Magistrate in relation to her bankruptcy. The primary legal issue the court had to decide was whether the sequestration order was correctly made, given Mrs Burgess's claims of potential cross-claims against the petitioning creditor and others. The court also needed to assess the merits of Mrs Burgess's appeal against the order.

The court examined the grounds of the appeal, which were that the Federal Magistrate did not properly consider Mrs Burgess's claims against the petitioning creditor and others. The court found that the Federal Magistrate had correctly assessed the claims and determined that they did not constitute sufficient cause to refrain from making the sequestration order. The court was satisfied that Mrs Burgess had committed an act of bankruptcy and that the requirements of section 52 of the Bankruptcy Act 1966 (Cth) were met. The court also noted that Mrs Burgess had not properly pursued the opportunities given to her to seek an adjournment or relief before the hearing of the appeal. The court concluded that Mrs Burgess's appeal was without merit and dismissed it.

The court further ordered that the Notice of Motion and the Notice of Appeal were dismissed, and Mrs Burgess was to pay the costs of the proceeding to the respondent. The court held that Mrs Burgess had been given adequate opportunity to establish her solvency and that her failure to comply with an undertaking given to the court was not a deliberate act of defiance. The court ultimately upheld the sequestration order made by the Federal Magistrate.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Although there has been a failure on the part of Mrs Burgess to comply with the undertaking given to the Court on 12 May 2010, it is not considered appropriate in the present proceeding to pursue that matter further. It is not considered that the failure on the part of Mrs Burgess to comply with the undertaking was any deliberate act taken in defiance of an order of the Court. In all probability it was but a product of the difficult circumstances in which she found herself.CONCLUSIONS Irrespective of any personal difficulty being experienced by Mrs Burgess, it is considered that her appeal is without merit and should be dismissed. Notwithstanding the failure of Mrs Burgess to appear at the hearing of her appeal, the opportunity was then taken to revisit afresh the circumstances in which the sequestration order had been made. Each of the requirements of s 52 of the Bankruptcy Act 1966 (Cth) were revisited, as was the appropriateness of the exercise of the discretion there conferred. That reconsideration of those circumstances only affirmed the correctness of the decision of the Federal Magistrate in making the sequestration order. Whatever may be the extent of her difficulties, Mrs Burgess was provided the opportunity on 6 August 2010 to advance any such application as she saw fit in support of an adjournment of the hearing on 24 August 2010. She did not then avail herself of that opportunity. Nor did she avail herself of the opportunity to again seek such relief before the hearing of the appeal itself commenced on 24 August 2010. If she wished to advance any claim in support of a deferral of the hearing of the appeal, those were the appropriate opportunities when such claims should have been made. Telephone communications and correspondence with the Registry of this Court maintaining the difficulties she was experiencing are not a substitute for seeking an order in the appropriate manner. Litigation is to be conducted in open Court. That is the forum in which facts and submissions may be advanced, tested and resolved. Litigation is not to be conducted by a party unilaterally telephoning and otherwise communicating with Registry officers. In proceeding to dismiss the appeal, it is considered that Mrs Burgess has been given an adequate opportunity to establish her solvency both before the Federal Magistrate and, again, in this Court. ORDERS The Orders of the Court are:1.The Notice of Motion as filed on 21 April 2010 is dismissed.2.The Notice of Motion as filed on 3 August 2010 is dismissed.3.The Notice of Appeal as filed on 6 April 2010 is dismissed.4.The Appellant is to pay the costs of the Respondent of and incidental to the proceeding, as agreed or taxed, including the costs of the interim applications dated 21 April 2010 and 3 August 2010 (together with any reserved costs), with such costs to be paid in priority in accordance with s 109(1) of the Bankruptcy Act1966 (Cth).

Ratio Decidendi

Legal Principle Established

Grounds 1 and 2 of the Notice of Appeal, it is considered, are without merit.THE MAKING OF THE SEQUESTRATION ORDER The Federal Magistrate was satisfied that an act of bankruptcy had been committed by Mrs Burgess and was not satisfied that the grounds of opposition she advanced provided “any reason” not to make the sequestration order as sought. Following such reasons as were provided in paragraph [7] of his reasons for decision, the Federal Magistrate continued on to conclude as follows:[8] Mrs Burgess also asserts that she has potential claims against the petitioning creditor and others in relation to the sale of three properties which, in Mrs Burgess’s view, were sold for substantially less than their true value. Mrs Burgess asserts fault on the part of the petitioning creditor, solicitors acting in relation to the sale, and a real estate agent acting in relation to the sale. It is not unusual for properties, in circumstances such as the present, where sales are, in effect, forced by secured creditors in possession, to be sold for less than they would fetch where there is a willing but not over anxious vendor. I am not persuaded that the concerns Mrs Burgess has support an argument that those concerns are a reason for the Court not to make a sequestration order. I am not persuaded that the grounds of opposition advanced by Mrs Burgess provide any reason for the Court not to make that order.[9] I am satisfied that Mrs Burgess committed the act of bankruptcy alleged in the petition. I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act 1966 (Cth) requires proof. I note that the date of the act of bankruptcy is 20 October 2009. I further note that a consent to act as trustee has been signed by Scott Pascoe and has been lodged with the official receiver in Sydney. Although s 52(2) was not expressly referred to by the Federal Magistrate in paragraph [8] of his reasons for decision, it would appear that the matters there addressed were directed to that subsection. The “claims” referred to by the Federal Magistrate, and further addressed in the affidavit evidence of Mrs Burgess, were clearly considered by the Federal Magistrate to fall short of providing “sufficient cause” within the meaning of s 52(2)(b) not to make the sequestration order. The onus, it will be recalled, lies upon the debtor to satisfy the Court that a sequestration order should not be made: Re Verma; Ex parte Deputy Commissioner of Taxation (NSW) (1984) 4 FCR 181. On proof of the matters mentioned in s 52(1), a petitioning creditor has a prima facie right to the making of a sequestration order and the Court will proceed to make a sequestration order unless the Court is satisfied that for other sufficient cause a sequestration order should not be made: s 52(2)(b). See Commissioner of Taxation v Cumins [2008] FCA 353 at [14]; 101 ALD 78 at 81 per Gilmour J. And, to the extent that a debtor maintains that there are “claims” that may be pursued, the debtor must establish that any such claim is “a real claim against the creditor that is likely to succeed”: St George Bank Limited v Helfenbaum [1999] FCA 1337. Sundberg J there set forth the text of s 52(2) and continued on to summarise the relevant principles as follows:[13] … The existence of a cross-claim may be a “sufficient cause” within s52(2)(b) for declining to make a sequestration order: … It is for the debtor to establish the existence of “sufficient cause”: Cain v Whyte (1933) 48 CLR 639 at 645-646; … He must establish that he has a real claim against the creditor that is likely to succeed. If the Court is satisfied that there is such a claim, and that its quantum is likely to equal or exceed the creditor’s claim, it will not make a sequestration order. If the claim is likely to be less than the creditor’s claim, the Court will require the debtor, if he is to avoid a sequestration order, to pay the difference between the judgment debt and the amount he is likely to recover on his claim. … A debtor does not establish a real claim that is likely to succeed merely by producing a statement of claim in an action against the creditor … or by pointing to the existence of current litigation against the creditor: … While the Court does not try the cross-claim in advance, the debtor must adduce sufficient evidence to show that it is a real claim which is likely to succeed: …The evidence before the Federal Magistrate in the present proceeding did not satisfy him that the “claims” identified by Mrs Burgess provided any reason not to make a sequestration order.