Chaouk v SMK Developers Pty Ltd

[2016] FCCA 591

FEDERAL CIRCUIT COURT OF AUSTRALIA

CHAOUK v SMK DEVELOPERS PTY LTD [2016] FCCA 591

Catchwords:
BANKRUPTCY – Application for review of a sequestration order – sequestration order made 19 July 2012 – application for review filed
23 November 2015 – consideration of Federal Circuit Court Rules 2001 – application out of time – failure of applicant to explain delay – application for review dismissed – costs order made against applicant.

Legislation:

Bankruptcy Act 1966 (Cth)

Federal Circuit Court Rules 2001, r.20.01(1)(b)

Re Telescriptor Syndicate Ltd [1903] 2 Ch 174

Applicant: JOHN CHAOUK

Respondent: SMK DEVELOPERS PTY LTD
(ACN 105 098 619)

File Number: MLG 396 of 2012

Judgment of: Judge Wilson

Hearing date: 10 March 2016

Date of Last Submission: 10 March 2016

Delivered at: Melbourne

Delivered on: 10 March 2016

REPRESENTATION

Counsel for the Applicant: Mr K. Boden

Solicitors for the Applicant: Starnet Legal

No appearance on behalf of the Respondent

ORDERS

1. The Application for Review filed 23 November 2015 is dismissed.

2. The applicant pay the respondent’s costs of and incidental to this proceeding, such amount to be paid out of the bankrupt estate of the applicant.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 396 of 2012

JOHN CHAOUK

Applicant

And

SMK DEVELOPERS PTY LTD (ACN 105 098 619)

Respondent

REASONS FOR JUDGMENT

(As revised from Transcript)

Introduction

1. Pursuant to Orders made by a Registrar of this Court on 19 July 2012,

   
   

   a sequestration order was made against the estate of John Chaouk,

   
   

   also known as Hazzah Chaouk, born 21 March 1949 (“the bankrupt”). On 23 November 2015, the bankrupt applied to this Court for the review of the sequestration order made on 19 July 2012.[1]

   
   

   That application for review came before me on 17 December 2015 on which date I adjourned the hearing of the application to

   
   

   10 March 2016. On 10 March 2016, I heard Mr K. Boden, solicitor, who appeared for the bankrupt, and argument in support of the application for review.

   [1] Application for Review filed 23 November 2015.

2. Under the Federal Circuit Court Rules 2001, the bankrupt was required, but failed, to apply to this Court for review of the Registrar’s Order within seven days of the date on which the Registrar made the sequestration order.[2] In this case, the bankrupt had until 26 July 2012 within which to apply for the review of the sequestration order given that the sequestration order was made on 19 July 2012. 

   [2] Federal Circuit Court Rules 2001, r.20.01(1)(b).

3. Instead of applying for the review by 26 July 2012, the bankrupt applied for the review of the sequestration order on

   
   

   23 November 2015, that is to say, almost three and a half years later than he should have done. No order of the Court has been made granting the bankrupt an extension of time within which to have applied for the review of the sequestration order.

Synopsis

1. For the reasons that follow, in my judgment this application for review has failed.

Background

1. On 25 July 2011 in the Magistrates Court at Melbourne,

   
   

   SMK Developers Pty Ltd (“SMK”) obtained judgment against the bankrupt in the sum of $33,215.00, together with interest of $6,470.10 and costs of $9,014.00 (“the judgment debt”). The bankrupt did not pay the judgment debt nor compromise in respect of it with SMK. 

2. In consequence of the bankrupt’s failure to pay the judgment debt or compromise in respect of it, SMK served a bankruptcy notice on the bankrupt calling upon him to pay the judgment debt as well as interest that had accrued on it since the entry of the judgment debt, making a total sum of $49,971.17.[3] SMK’s bankruptcy notice was served on the bankrupt on 14 November 2011, service having been effected by

   
   

   Rami Jurdi, the solicitor for SMK.[4] The bankrupt did not comply with the bankruptcy notice by paying the sum stated on it or by entering into a compromise with SMK.

   [3] Affidavit of Service filed on behalf of SMK Developers Pty Ltd on 10 April 2012, at Annexure ‘B’.

   [4] Affidavit verifying paragraph 4 of the Creditor’s Petition filed on behalf of SMK Developers Pty Ltd on 10 April 2012.

3. On 10 April 2012, SMK filed a creditor’s petition in this Court, returnable on 24 May 2012. SMK’s creditor’s petition was personally served upon the applicant at 9.30 a.m. on 4 May 2012 at

   
   

   91 Nicholson Street, Footscray. A deponent whose name is

   
   

   Harlem Tane Johnston swore to his personal service of the bankrupt with the creditor’s petition on that date.[5]

   [5] Affidavit of Service filed by Harlem Tane Johnstone on 10 May 2012.

4. On 24 May 2012, on the return of the hearing of the creditor’s petition, the bankrupt filed a notice in the prescribed form indicating that he intended to oppose SMK’s creditor’s petition on the basis that he had applied for a re-hearing of the case that led to the judgment debt.[6]

   
   

   In that notice, the bankrupt asserted that he was solvent.

   
   

   SMK’s authorised representative deposed to the fact that, as at

   
   

   23 May 2012, the day before, the bankrupt was still indebted to SMK for the whole of the sum set out in the creditor’s petition.[7]

   [6] Form 5 Notice stating grounds of opposition to application, interim application or petition filed by John Chaouk on 24 May 2012.

   [7] Affidavit of Final Debt filed by Hasan Erliinoglu on 24 May 2012.

5. Even though the bankrupt had earlier stated in the document filed

   
   

   24 May 2012[8] that he had applied for the re-hearing of the

   
   

   Magistrates Court proceeding that led to the judgment debt,

   
   

   the bankrupt had, in fact, taken no step to do so by 24 May 2012 when the first return of the creditor’s petition came before the Registrar. Nevertheless, on 24 May 2012, the Registrar made orders permitting the bankrupt until 6 June 2012 to advance his contentions.

   
   

   The Registrar otherwise adjourned the further hearing of the

   
   

   creditor’s petition until 14 June 2012.

   [8] Form 5 Notice stating grounds of opposition to application, interim application or petition filed by John Chaouk on 24 May 2012.

6. On 1 June 2012, the bankrupt’s application for re-hearing of the matter that led to the judgment debt was heard in the Magistrates Court of Victoria. Registrar Johnstone made orders on that day setting aside the Orders made on 25 July 2011, that is to say, the judgment debt.[9]

   
   

   On 1 June 2012, a Registrar of the Magistrates Court ordered the bankrupt to file his defence to SMK’s proceeding within 14 days of

   
   

   1 June 2012. The Registrar ordered the bankrupt to pay costs in default of which any defence was to be struck out. The bankrupt duly filed a defence,[10] but he failed to pay the costs ordered by the Court.

   [9] Affidavit of Rami Jurdi filed 19 July 2012, at Annexure “RJ-1”.

   [10] Affidavit of John Chaouk filed 23 November 2015, at Exhibit “JC1”.

7. SMK went back to the Magistrates Court pointing out that the bankrupt had not paid the costs order. On 5 July 2012, his Honour

   
   

   Magistrate MacLean made orders setting aside the bankrupt’s defence. His Honour also ordered judgment in favour of SMK in the revised amount of $57,976.23, made up of the claim of $35,215.00 plus interest of $9,761.72 and costs of $12,999.51.[11] 

   [11] Affidavit of Rami Jurdi filed 19 July 2012, at Annexure “RJ-6”.

8. While activity in the Magistrates Court was underway, somewhat earlier on 14 June 2012 in this Court, Registrar Luxton heard the return of SMK’s creditor’s petition. By then, the bankrupt had not filed any material to substantiate his opposition to SMK’s creditor’s petition. Nevertheless, Registrar Luxton gave the bankrupt yet another opportunity to put evidence before this Court of any basis for opposing SMK’s creditor’s petition so long as the bankrupt did so by

   
   

   19 July 2012. The Registrar adjourned the hearing of SMK’s

   
   

   creditor’s petition to 19 July 2012.

9. Pausing there, relevant to the bankrupt’s bankruptcy petition,

   
   

   the bankrupt was served with SMK’s bankruptcy notice on

   
   

   14 November 2011. Between that date and 19 July 2012, the bankrupt had over eight months to pay the judgment debt to SMK. He failed to do so. In the same period, he could have but failed to compound with SMK or to compromise with it concerning the judgment debt. The bankrupt also failed to do that.

10. Unsurprisingly, when SMK’s creditor’s petition came before the Court on 19 July 2012, the Registrar made the sequestration order that is in issue in this application. The making of that order was supported by evidence that, on that day, SMK’s judgment debt stood at $55,976.23.[12]

    [12] Affidavit of Rami Jurdi filed 19 July 2012.

This application for review

1. The bankrupt brought this application for review of the Registrar’s sequestration order made on 19 July 2012 on 23 November 2015. Well over three years had elapsed between the making of the order, review of which was sought, and this application. The bankrupt had seven days, not three years, to apply for review. Before turning to the merits of the application, let me address some matters to which the bankrupt swore in his affidavit in support of his application for review.[13] 

   [13] Affidavit of John Chaouk filed 23 November 2015.

2. First, in his affidavit sworn 11 November 2015,[14] the bankrupt swore that SMK obtained a sequestration order against the bankrupt despite the fact that the underlying judgment debt upon which the application was based had been set aside. While it was true that,

   
   

   for a short period between 1 June 2012 and 5 July 2012 SMK’s judgment debt was set aside. Pursuant to the orders made by his Honour Magistrate MacLean on 5 July 2012, SMK’s judgment debt was reinstated. So it was erroneous, dare I say misleading, for the bankrupt to swear in November 2015 that SMK’s judgment debt was set aside when, in truth, it was valid, subsisting and enforceable on

   
   

   11 November 2015.

   [14] Affidavit of John Chaouk filed 23 November 2015 at [6].

3. Second, as a basis for urging the Court to extend a degree of leniency to him, in his affidavit sworn 11 November 2015,[15] the bankrupt swore that he was overseas when the sequestration order was made against him. Even accepting that he may have been overseas on that date,

   
   

   the fact of his being overseas did not prevent his retaining legal representation to appear on his behalf on that day and to present any submission on his behalf. The bankrupt swore that by reason of his being overseas he was unable to instruct lawyers to appear at that hearing. That is nonsense. Email, Skype or mobile phones were available. Had the bankrupt wished to instruct legal representatives on

   
   

   19 July 2012, no technological impediment existed to giving effect to that. Whether any further indulgences in his favour would have been extended to him by this Court, in view of the indulgences given over several appearances by the Registrar, is a different matter.

   [15] Affidavit of John Chaouk filed 23 November 2015 at [7].

4. Third, the bankrupt swore that he was overseas between 8 July 2012 and 25 February 2015 and that he had learned for the first time of the making of the sequestration order in or about September 2015.

   
   

   I am highly suspicious of that evidence. If true, it meant that he left for overseas within three days of the Magistrates Court making an order against him for an amount of almost $56,000.00, he having taken no steps whatsoever to address that judgment debt. Such behaviour, if true, bears all the hallmarks of the absence of commercial morality canvassed in such cases as in Re Telescriptor Syndicate Ltd[16] and others. 

   [16] [1903] 2 Ch 174.

5. The bankrupt now seeks orders for the review of the sequestration order made 19 July 2012. Several things must be said about this

   
   

   review -

   a)

   first, it is incomprehensibly out of time – over three years.

   
   

   The bankrupt should not be permitted to slough off the seriousness of that delay merely be asserting that he was overseas. The bankrupt failed to adduce any meaningful evidence explaining the three year delay; 

   b)second, despite the remarkably generous indulgences given between the filing of the creditor’s petition and the making of the sequestration order, the bankrupt offered no information about the circumstances in which he said he did not owe SMK the judgment debt. In the absence of such evidence, this application has all the hallmarks of delay; and

   c)third, as this application is so wildly out of time, there being no material to support any application to extend the time within which to bring this application, it falls to be dismissed as incompetent. This application is utterly devoid of merit.

6. I dismiss the application for review and make an order for costs against the bankrupt.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Judge Wilson

Associate: 

Date:  17 March 2016