CBA v Chiotelis

[2003] FMCA 39

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CBA v CHIOTELIS & ANOR [2003] FMCA 39

BANKRUPTCY – Sequestration order – dispute over terms of settlement – no defence counterclaim – no basis to go behind judgment.

Bankruptcy Act 1966, s.52
Federal Court Rules, O.62

Corney v Brien (1951) 84 CLR 343
Wren v Mahony (1972) 126 CLR 212

Applicant: COMMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124)

Respondents: ANGELO CHIOTELIS and SOPHIE CHIOTELIS

File No: MZ 825 of 2002

Delivered on: 10 February 2003

Delivered at: Melbourne

Hearing Date: 10 February 2003

Judgment of: McInnis FM

REPRESENTATION

Counsel for the Applicant: Ms D.S. Joseph

Solicitors for the Applicant: G S Ray

Respondents: First Respondent in person

ORDERS

1. That the estate of Angelo Chiotelis be sequestrated.

2. That the estate of Sophie Chiotelis be sequestrated.

3. That the Respondents pay the Applicant's costs of and incidental to the petition including reserved costs, if any, to be taxed pursuant to order 62 of the Federal Court Rules. 

4. I note that the date of the act of bankruptcy in relation to each of the respondents is 24 June 2002.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 825 of 2002

COMMONWEALTH BANK OF AUSTRALIA
(ABN 48 123 123 124)

Applicant

And

ANGELO CHIOTELIS and SOPHIE CHIOTELIS

Respondents

REASONS FOR JUDGMENT

1. This is an Application by the COMMONWEALTH BANK OF AUSTRALIA, the Applicant Creditor (the Creditor), by way of a Creditor's petition seeking sequestration orders against ANGELO CHIOTELIS and SOPHIE CHIOTELIS (the Debtors), the first and second Debtors respectively.  The Creditor's petition relies upon a bankruptcy notice which was filed on 20 October 2001.

2. That bankruptcy notice relies upon a judgment entered in the Supreme Court of Victoria on the 27th day of September 2000 before Master Wheeler.  The judgment entered by consent provided that the First and Second Defendants, now the Debtors pay to the Creditor the sum of $70,000 and a further order, again by consent, that the First and Second Defendant pay the costs of reinstating the proceeding and obtaining this order.

3. To understand the basis of that judgment one needs to consider terms of settlement which have been entered into by the parties.  Those terms of settlement were duly executed by the parties on 10 May 2000 and are exhibited to the affidavit of Callum Ross Thompson sworn 23 January 2003.  The terms provide for settlement of a dispute then between the parties which was before the Supreme Court which involves, in part, a payment by the then defendants to the Creditor of a bank cheque of $180,000 to be paid by 4 pm on 17 May 2000.

4. It is common ground in this matter that the Debtors did in fact pay to the Creditor pursuant to the terms of settlement the sum of $180,000.  That amount was paid, according to the affidavit material before the court, on about 30 May 2000.  No issue was apparently taken or pursued by the Applicant in relation to the late payment of that amount and it is common ground that that amount was paid and accepted without there being any further action.

5. The terms of settlement, however, further provided in clause 2 that in addition to that sum of $180,000, the First and Second Defendants would pay the plaintiff in those proceedings, the Applicant in the current proceedings, a further sum of $70,000 and that sum was to be paid by 60 equal monthly instalments in the sum of $1,166.66 by way of bank cheque or cleared funds made out to the Commonwealth Bank of Australia.  An address was provided for delivery of those cheques and the condition further provides that:

   “The first such instalment shall fall due on 17 June and subsequent instalments shall be paid thereafter on the 17th day of each succeeding month.”

6. It is not disputed that the subsequent amounts were not paid, and in the circumstances the default clause of the terms of settlement, that is, clause 4, provided an opportunity for the plaintiff in those proceedings to then have the proceedings before the Supreme Court reinstated.  Attached to those terms of settlement were two sets of minutes of consent orders, one to be used in the event of default of payment of the $180,000 amount and the second to be used in the event of default of payment of the instalment of the $70,000 amount, and those consent orders accurately reflect the orders that were in fact obtained before the Master and to which I have already referred.

7. When the Application came before this court before a registrar on

   
   

   5 December 2002, orders by the court at that stage were made as follows:

   “1.The further hearing of the petition be adjourned to 10 February 2003 at 9.45 a.m.

   2.The applicant serve the respondent with the creditor's petition and supporting affidavits by post to 25 Edmonds Street, Narre Warren North 3805 by 16 December 2002.

   3.Service of the creditor's petition be deemed to be effected on 15 December 2002.

   4.The respondents file and serve a notice of grounds of opposition and any affidavits upon which they propose to rely by 13 January 2003.

   5.Applicant file and serve any further affidavits in reply by 24 January 2003.

   6.Applicants costs of that day were reserved.”

8. Since that date further affidavit material has been filed for and on behalf of the Applicant.  More significantly is a notice of intention to oppose the Application or petition which has been filed by both respondents.  Annexed to that notice which was filed on 13 January 2003 are two affidavits sworn respectively by the First and Second Respondents verifying the statements contained in the notice of intention to oppose the Application.  The notice of intention to oppose the Application or petition provides the following:

   “1.The First and Second Respondent denies owing the amount claimed by the applicant and it was unknown that a judgment was obtained as stated in paragraph (1) of the creditor's petition. 

   The First and Second Respondent know that a settlement was reached by four parties and the Applicant 10 April 2000 to settle for the amount of $180,000.

   2.The Applicant has no rights to any property of the First and Second Respondents as stated in paragraph (2) of the Creditor's Petition.

   3.The First and Second Respondents have no knowledge of committing bankruptcy at any time but agree to being in Australia and were ordinarily residents as stated in paragraph (3) of the Creditor's Petition.

   4.The First and Second Respondents deny paragraphs 4(a) and 4(b) of the Creditor's Petition.

   The affidavits of both respondents, as I have indicated, seek to verify that notice.

9. When the matter was before me this day there was no appearance for the second respondent.  There was an appearance for the first respondent.  The first respondent, who is the husband of the second respondent, explained that the second respondent would not be able to attend court this day and would not in fact be attending.  I am satisfied, however, that there has been proper service on the basis of the affidavit material before this court upon each of the respondents in accordance with the orders made by the registrar to which I have already referred.  I am further satisfied that on the material before me there has been sufficient evidence of service upon each of the respondents of the relevant bankruptcy notice.

10. It is clear that there may have been some doubt in the mind of the registrar when hearing this matter on 5 December 2002 in relation to the service of the respondents of the petition and supporting affidavits.  That doubt has now been removed by the subsequent filing of affidavits of service and no real issue is now taken as to the subsequent service of the petition and supporting affidavits.

11. Essentially, it is submitted on behalf of the respondents that there was not a debt owed to the Applicant of the amount of $70,000 as claimed, that the judgment that was entered pursuant to the terms of agreement or terms of settlement was not a judgment which the Applicant was entitled to enter and that in the circumstances the respondents had only owed to the Applicant the amount of $180,000. I understand it is common ground between the parties that that amount has been paid.

12. The basis for the respondents' notice of opposition essentially is that the amount due under the terms of settlement of $180,000 has been paid and there was no other amount payable and hence a judgment that was entered before the Master of the Supreme Court was a judgment which was wrongly entered.  There is some concern expressed and dispute about the notice which may or may not have been given to both the Debtors of the judgment that was entered, which clearly on the face of it was entered in circumstances where there was indeed no appearance by or on behalf of the two Debtors.

13. In the circumstances, however, it is clear that subsequently as a result of the bankruptcy notice and the reliance upon that judgment in that notice and certainly thereafter service as ordered by the registrar of the Creditor's petition and supporting affidavits, it was evident that there had been that judgment entered.  There is no dispute in the present case that there have been no steps taken for or on behalf of each of the respondents to seek to set aside the judgment which was entered in the Supreme Court of Victoria before the Master, as described earlier, on 27 September 2000.

14. It is said for and on behalf of the respondents that neither can afford the assistance of legal advice and that there is some degree of confusion about the terminology of the Supreme Court proceedings and indeed the terms and conditions of the terms of settlement which have been referred to, which were entered into without legal representation and in an effort to resolve then Supreme Court proceedings which were pending between the parties.

15. In matters of this kind one makes due allowance for the fact that both the respondents are not legally represented and have not had the benefit of legal advice and do not appear to have been represented certainly at the earlier stages of proceedings before this court and it would appear were not represented at the time when the terms of settlement were entered into in the Supreme Court on 10 May 2000.

16. Having made due allowance for that fact, however, the duty of a court sitting as a court of bankruptcy in relation to matters of this kind is clear.  Before going behind a judgment which on the face of it has been regularly entered, the court needs to have sufficient reason not to exercise its discretion to treat a judgment as satisfactory proof of the debt where there are substantial reasons for doubting whether it really is a debt due to the Creditor (see Corney v Brien (1951) 84 CLR 343 Fullagar J at 353 to 358; see also Wren v Mahony (1972) 126 CLR 212 Barwick CJ at 224 to 225).

17. In the present case, on the material before me, I am satisfied that a proper reading of the terms of settlement and the annexed minutes of consent orders, which appear to be regularly executed by the respondents, that the judgment entered in the Supreme Court before the Master as earlier described was a judgment which was entered regularly and on a proper basis and is not, in the circumstances, what might be otherwise described as a default judgment other than it is a judgment entered in default of compliance with terms of settlement.  Reliance was properly placed on the minutes of consent orders which permitted the Applicant in these proceedings to enter the judgment in the manner described.

18. There is otherwise, in my view, no material which would be sufficient to permit this court to exercise its discretion to therefore go behind what on the face of it appears to me to be a regularly entered judgment and a judgment entered on a proper basis.  That is not to say that there is not a degree of dissatisfaction and concern by the respondents as to the merit of the judgment entered or indeed that they do not continue to have concerns about terms of settlement which they otherwise executed and which now appear to contain a clause which either they had little or no knowledge of or did not have as clear a understanding at the time they entered into the terms of settlement as might be the case in normal circumstances where parties are properly represented.

19. Nevertheless, on the material before me I am satisfied that the meaning of those terms of settlement are clear. The judgment was entered regularly and therefore the bankruptcy notice which has been issued in this matter was properly the subject of a judgment debt. That, in turn, was the foundation for the Creditor's petition which I am now satisfied has properly been served. I am satisfied in relation to the requirements of section 52 of the Bankruptcy Act. I am otherwise satisfied in relation to the issues concerning service and proof of debt in this matter and I have regard to the affidavit material which has now been filed in relation to both the affidavit of search and the affidavit of debt where leave was granted to the Applicant to file those affidavits this day. In all the circumstances, in my view, it is appropriate that the sequestration orders be made.

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

Associate: 

Date:  10 February 2003