Cervantes Pty Ltd v Moutidis (No. 2)
[2005] FMCA 214
•17 February 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CERVANTES PTY LTD v MOUTIDIS (No. 2) | [2005] FMCA 214 |
| BANKRUPTCY – Whether adjournment should be allowed to challenge meeting held arising from authority signed pursuant to s.188 of the Bankruptcy Act – requirements of meeting of creditors to be considered in accordance with the law. |
Bankruptcy Act 1966, ss.188, 189AAA
Cervantes Pty Ltd v Moutidis [2004] FMCA 1023
| Applicant: | CERVANTES PTY LTD |
| Respondent: | ELIAS MOUTIDIS |
| File No: | MLG 1122 of 2004 |
| Delivered on: | 17 February 2005 |
| Delivered at: | Melbourne |
| Hearing Date: | 17 February 2005 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Counsel for the Applicant: | Mr M.W. Sanger |
| Solicitors for the Applicant: | Daly & Kernahan |
| Counsel for the Respondent: | Mr D O'Haire |
| Solicitors for the Respondent: | O’Haire Tanner Legal |
| Counsel for the First Supporting Creditor: | Mr D. Gillard |
| Solicitors for the First Supporting Creditor: | Property & Business Commercial Lawyers |
| Second Supporting Creditor: | Mr R. Jimenez in person |
| Counsel for the Third and Fourth Supporting Creditors: | Mr P. Fary |
| Solicitors for the Third and Fourth Supporting Creditors: | Lewenberg & Lewenberg |
ORDERS
Any application of the Debtor seeking to challenge the conduct of the meeting by the Trustee held on 28 January 2005 shall be filed and served by 4 pm on 18 February 2005.
The Debtor shall file and serve any further affidavits in support of the application by 4 pm on 21 February 2005.
The Creditors and the Trustee shall file and serve any affidavits upon which they seek to rely by 4 pm on 4 March 2005.
All times shall be abridged to enable the application by the Creditor to be heard and determined on 8 March 2005.
The application by the Debtor pursuant to Order 1 hereof and the Creditors Petition shall be fixed for hearing at 2 pm on 8 March 2005.
The costs of the parties, save for the Debtor, be reserved.
Liberty to apply is granted to the parties in relation to any matters arising out of these orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1122 of 2004
| CERVANTES PTY LTD |
Applicant
and
| ELIAS MOUTIDIS |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
In this application before the court by way of a petition, orders were made by the court on a previous occasion in circumstances where an authority had been prepared by the debtor pursuant to s.188 of the Bankruptcy Act 1966. The effect of amendments to the Bankruptcy Act by way of insertion of a new provision, namely s.189AAA, meant that the petition was stayed.
The petition was in fact stayed and this matter, upon coming before the court on 4 February 2005, resulted in further orders in relation to affidavits and further submissions being made in circumstances where issues were raised arising out of a meeting of creditors held in accordance with the authority and the legislation on 28 January 2005.
Affidavits have been served by both the respondent debtor and the creditors, and when the matter came before the court this day, it was clear in the affidavit material that the debtor sought to challenge the way in which the meeting was conducted by the trustee on 28 January 2005. Though not set out discretely in a separate application, the thrust of that challenge appears to be one that would result in the court being asked to declare that the meeting was a nullity.
The debtor has sought a further short adjournment of this petition and has done so on the basis that he seeks time to file and serve an appropriate application seeking to declare the meeting held on 28 January 2005 a nullity. It seems common ground that any such application ought properly to name and be served upon the trustee, as the attack is made upon the conduct of the meeting by the trustee.
Hence for this court to consider that application, in the normal course of events, an adjournment would be granted. The problem in this case is that by granting a further adjournment of the creditors petition, it would in real terms effectively delay further the pursuit of the petition which on the material before the court is argued by those appearing for and on behalf of the creditors. There is overwhelming evidence that the debtor is insolvent, and it is also noted in passing that previous objections raised by the debtor in relation to service of the bankruptcy notice are not now pursued. Understandably, in those circumstances, the creditors oppose any application for adjournment which would result in further delay of the petition.
The court undoubtedly has a discretion in considering an application for an adjournment. There is no doubt that it is appropriate for the court to take into account the significance of a sequestration order upon the debtor. Likewise, there is no doubt that the court should take into account, and I do take into account, the impact upon creditors who in this case have waited for a significant period of time for the petition to be heard and for the opportunity to argue that a sequestration order should be made.
The introduction of s.189AAA of the Bankruptcy Act which commenced on 1 December 2004, as I have indicated in an earlier decision of Cervantes Pty Ltd v Moutidis [2004] FMCA 1023, was a significant amendment to the legislation which provides an alternative means by which debtors might avoid the consequences of a sequestration order. Initially that is done by the signing of an authority of the kind contemplated by s.188 of the Bankruptcy Act which by virtue of the operation of s.189AAA provides a basis upon which the petition is automatically stayed. It is stayed until the conclusion of the meeting or the adjournment of the meeting.
In this case there is evidence that the meeting concluded and the proposal by the debtor rejected by a clear majority of the creditors. However, the opportunity to at least avoid a sequestration order by means of a meeting of this kind, following the signing of authority, should not be seen as an opportunity for any type of meeting to be held regardless of due process or the appropriate law to be applied by trustees or indeed others attending the meeting.
In my view, although potentially any further delay which occurs as a result of the foreshadowed challenge to the meeting may be seen as a further delaying tactic by the debtor, it cannot be said that it is totally without merit or that there is no arguable issue to be raised. So much is clear, at least, from the brief reference to the issues in the affidavit material filed for and on behalf of the debtor.
A meeting held in these circumstances must be a meeting held in accordance with law, otherwise the process of providing an opportunity to debtors to avoid the consequences of a sequestration order will be devalued.
In this application, I have significant reservations in relation to the appropriateness of adjourning the matter, but those reservations are outweighed by what I regard to be the interests of justice in permitting the debtor to at least have heard and determined any challenge that may be sought to be raised in relation to the conduct of the meeting on 28 January 2005. However, it seems to me that that challenge, if it is to be raised, should be raised properly and should not be permitted to unduly inconvenience the due process pursued by the creditors or to otherwise unduly delay that process.
In this case I am prepared to allow the adjournment and to make the following orders which are consistent with allowing the adjournment but providing a time frame which I regard as short but appropriate in the interests of justice and in the interests of all parties. I am satisfied that the debtor in these circumstances ought to be permitted to at least pursue in a proper form, with the inclusion of the trustee as a party, an attack on the conduct of the meeting.
I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 17 February 2005
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