CGU Workers Compensation v Maraache
[2007] FMCA 425
•20 March 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CGU WORKERS COMPENSATION v MARAACHE | [2007] FMCA 425 |
| BANKRUPTCY − Creditor’s petition − adjournment − where the debtor failed to comply with orders made by the court − where no intention to oppose the creditor’s petition was filed − where the debtor sought an adjournment in order to obtain legal advice and proceed with the application for review − whether the adjournment should be granted where the debtor has not complied with the provisions of Rules 7.06(3), (4) and (5) Federal Magistrates Court (Bankruptcy) Rules 2006. |
| Bankruptcy Act 1966, ss.73, 153B Federal Magistrates Court (Bankruptcy) Rules 2006 |
| Pattison v Hadjimouratis [2006] FCAFC 153 |
| Applicant: | CGU WORKERS COMPENSATION (NSW) LIMITED (ACN 003 181 002) |
| Respondent: | MUSTOPHA MARAACHE |
| File number: | SYG1728 of 2006 |
| Judgment of: | Raphael FM |
| Hearing date: | 20 March 2007 |
| Date of last submission: | 20 March 2007 |
| Delivered at: | Sydney |
| Delivered on: | 20 March 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr B Skinner |
| Solicitors for the Applicant: | Jones King Lawyers |
| For the Respondent: | In person |
ORDERS
Application by debtor dismissed.
Applicant’s costs be paid out of the estate of the debtor with the same priority as those costs that are to be paid on the petition.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1728 of 2006
| CGU WORKERS COMPENSATION (NSW) LIMITED |
Applicant
And
| MUSTOPHA MARAACHE |
Respondent
REASONS FOR JUDGMENT
On 17 January 2007 Registrar Kavallaris made a sequestration order against Mustopha Maraache on the application of CGU Workers Compensation (NSW) Limited. The petition was based upon a judgment entered in the Local Court of New South Wales on 12 September 2002 in the sum of $12,142.71. The bankruptcy notice to which that judgment was attached was issued on 15 February 2005 and served on 1 March. There is an affidavit of Ronny Azzam dated 6 March 2007 which sets out a history of the interaction between the debtor and the creditor which involved a certain number of payments.
On 7 February 2007 the debtor applied for review of the Registrar’s decision and an affidavit was filed. The debtor sets out his version of the history of the transactions between himself and the creditor and then stated that he was solvent and was more than willing to pay any outstanding debts. The debtor runs a transport business which has as its assets a number of vehicles and which employs a number of people. The court is always concerned when this history is revealed to ensure that a person running a business who is able to pay his debts should have an opportunity of doing so rather than being put out of business with the consequent financial loss both to himself and to those whom he employs.
The matter first came before me on 6 March when the debtor was represented. At that stage there had been no compliance with Rule 7.06 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (the “Rules”) and no intention to oppose the petition had been filed even though what was being sought was a complete review. I therefore made orders that a notice of intention to oppose be filed before 8 March, that the respondent file and serve any further affidavit upon which he intended to rely before 12 March, and that there be compliance with Rules 7.06(3), (4), (5) of the Rules. I ordered that the trustee prepare a report pursuant to Rule 7.06(6) of the rules and set the matter down for hearing today.
No notice of intention to oppose was filed and I have had no evidence that any of Rules 7.06(3), (4) or (5) have been complied with. The debtor arrived today without representation. He informed me that he was dissatisfied with his legal representatives and he had severed his retainer. He told me that he could raise the money to pay off the debts all he needed was time. He also told me that he didn’t owe any money to CGU. His request to me today was for an adjournment so that he could obtain legal advice and proceed with the application for review.
The courts have recently been exercised to consider the relationship between an application for review and an application for annulment under s.153B of the Bankruptcy Act 1966 (the “Act”): Pattison v Hadjimouratis [2006] FCAFC 153 per Nicholson, Jacobson and Lander JJ, and the cases cited therein. It is to be remembered that an annulment can be obtained under that section if the court is satisfied that the sequestration order ought not to have been made. The courts have been concerned about the effect of a delayed application for review particularly in relation to the position of creditors and that of a trustee. The current thinking would appear to be that unless an application for review can be brought and determined speedily without the necessity for too much work on the part of a trustee the more appropriate course to take is that of applying for annulment under s.153B which has the effect of providing greater protection to the trustee for his costs and expenses even though now, under the new rules, there is provision to require the trustee to provide reports in both cases so that the position of creditors is somewhat more aligned.
In this case, I ordered that the trustee provide a report and a very thorough report has been filed. This reveals that whilst there is a theoretical surplus of around $150,000 there are claims of approximately the same amount and the only way in which these claims can be met so as to realise the surplus would be for the undertaking of Mr Maraache to be sold. The report also reveals an unsatisfactory situation between Mr Maraache and the Commissioner for Taxation that needs to be clarified. Finally, the report makes comments upon the accounting activities of Mr Maraache’s business, which the trustee believes should be further considered.
In order for a person to be solvent, that person must be able to pay his or her debts as they fall due from his own moneys or from moneys reasonably available to him without incurring an equivalent debt upon the raising of that money. The evidence provided by the trustee did not indicate that this is something that could be done speedily in the case of this debtor and it could only be done by the liquidation of his business undertaking. Whilst the number of his creditors is not large the debts are substantial.
The debtor had not seen the report of the trustee so before the luncheon adjournment I made a copy available to him for him to consider. When he returned to court some two hours later he told me that he wished for an adjournment to obtain legal advice, consider the matters raised by the trustee and repeated the assertion that he did not owe any money to CGU. I am disinclined to grant the adjournment requested. I would dismiss the application for review on the basis that the debtor has not complied with the provisions of Rules 7.06(3), (4) or (5).
It seems to me that this old debt could have and should have been paid some considerable time ago if the debtor’s business was in the position that he claims it is in. It seems to me from the report of the trustee that the debtor’s affairs are not in the best of orders and that it is proper that his creditors should be ascertained and if the business is to be wound up in effect then that should be done by an experienced practitioner in order to obtain the best result for all Mr Maraache’s creditors. I have explained to Mr Maraache that this is not the end, that he can, if he is able to repay all of his debts 100 cents in the dollar, obtain an automatic annulment. I explained that he has the opportunity to put a scheme to his creditors under s.73 of the Act or that if he continues to maintain that the sequestration order should not have been made, make application for annulment under s.153B. These opportunities are available to him at any time and meanwhile the trustee can go about his business of ascertaining the proper status of Mr Maraache’s financial affairs.
I dismiss the application. I order that the respondent’s costs be paid out of the estate of the debtor with the same priority as those costs that are to be paid on the petition.
I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
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