Chep Australia Ltd v Russo

Case [2021] FedCFamC2G 27

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)

CHEP Australia Ltd v Russo [2021] FedCFamC2G 27    

File number(s): MLG 425 of 2021
Judgment of: JUDGE MCNAB
Date of judgment: 10 September 2021
Catchwords: BANKRUPTCY – review of a registrar’s decision – application to set aside sequestration order – hearing de novo – no proper basis to go behind the judgment which forms the basis of the bankruptcy notice – application for review dismissed – sequestration order made – applicant’s costs to be taxed and paid from the estate of the respondent.
Legislation:

Bankruptcy Act1966 (Cth) s 52.

Federal Circuit Court of Australia Act 1999 (Cth) s 104.

Federal Circuit Court Rules 2001 (Cth) r 20.03.

Cases cited:

Bechara v Bates [2021] FCAFC 34

Conlan v Mladenis [2007] FCA 1129

Ganesh v Dobrowolski [2021] FCA 909

Lowbeer v De Varda [2018] FCAFC 115

Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28
Division: Division 2 General Federal Law
Number of paragraphs: 37
Date of last submission/s: 19 August 2021
Date of hearing: 19 August 2021
Place: Melbourne
Counsel for the Applicant: Ms A Carruthers
Solicitor for the Applicant: Law Squared
Solicitor for the Respondent: Appearing in Person
Interested Party: Harwood Andrews Lawyers

ORDERS

MLG 425 of 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

CHEP AUSTRALIA LTD

Applicant
AND:

DOMENICO RUSSO

Respondent

ORDER MADE BY:

JUDGE MCNAB

DATE OF ORDER:

10 SEPTEMBER 2021

THE COURT ORDERS THAT:

1.The application for review filed by the Respondent on 21 May 2021 be dismissed.

2.The estate of Domenico Russo be sequestrated under the Bankruptcy Act 1996 (Cth).

3.The Applicant’s costs be taxed and paid from the estate of the Respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

REASONS FOR JUDGMENT

Judge McNab:

INTRODUCTION

  1. By an interlocutory application filed on 21 May 2021, the Respondent seeks, pursuant to s104 of the Federal Circuit Court of Australia Act 1999 (Cth) (“the FCCA Act”), to review a decision of the Court (by Registrar’s Order) made on 6 May 2021, where the Court ordered as follows:

    1. The applicant have leave to amend paragraph 4 of the petition to substitute 27 January 2021 as the date of the commission of the act of bankruptcy.

    2. Re-verification and re-service be dispensed with.

    3. The estate of DOMENICO RUSSO be sequestrated under the Bankruptcy Act 1966.

    4. The applicant creditor’s costs fixed in the sum of $9,181.35 be paid from the estate of the respondent debtor in accordance with the

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AGLC
Chep Australia Ltd v Russo [2021] FedCFamC2G 27
Case
[2021] FedCFamC2G 27
Decision Date

CaseChat Overview and Summary

In the matter of Chep Australia Ltd v Russo, the Federal Circuit Court was tasked with reviewing an application by the Respondent, Domenico Russo, to set aside a sequestration order made by a Registrar. The Applicant, Chep Australia Ltd, is a business providing pallet rental services. The Respondent, previously the operator of Baby Blue Group Pty Ltd, had an account with the Applicant, providing a personal guarantee. Disputes arose regarding the unauthorised and fraudulent use of the account for pallet orders, leading to the Applicant's issuance of proceedings in the Local Court of New South Wales. The Respondent filed an application for review, seeking compensation for depression, stress, and loss of reputation, alongside an order to set aside the sequestration.

The court considered whether the Applicant had proved the requirements under s52(1) of the Bankruptcy Act 1966 (Cth) and whether the sequestration order should remain in place. It also evaluated the Respondent's claims of domestic violence, the status of his employment, and allegations of fraudulent activities by an employee. The court had to determine if the application for review was valid and if the Respondent could substantiate his claims against the Applicant's evidence.

The Court dismissed the Respondent's application for review, finding no proper basis to go behind the judgment which forms the basis of the bankruptcy notice. The court was satisfied that the Applicant had proved the matters set out in s52(1) of the Bankruptcy Act and upheld the sequestration order against the Respondent’s estate. The Court also ordered that the Applicant's costs of the proceedings be taxed and paid from the sequestered estate, in accordance with the Bankruptcy Act. This decision reaffirms the principles of a de novo hearing in review proceedings, where the onus lies on the creditor to prosecute the petition and the debtor has the burden to prove solvency or sufficient cause under s 52(2) of the Bankruptcy Act.

The court's final orders were to dismiss the Respondent's application for review, to sequestrate the estate of Domenico Russo, and to direct that the Applicant's costs be taxed and paid from the Respondent's estate. The form of these orders is subject to the entry in the Court's records, and this copy of the Reasons for Judgment may be subject to review to remedy minor errors.

Orders

Orders of the court

THE COURT ORDERS THAT:

1. The application for review filed by the Respondent on 21 May 2021 be dismissed.

2. The estate of Domenico Russo be sequestrated under the Bankruptcy Act 1996 (Cth).

3. The Applicant’s costs be taxed and paid from the estate of the Respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor

Background

Background to the litigation

This review proceeding is conducted as a hearing de novo and the Court begins afresh and exercises for itself any discretion decided or exercised by the Registrar: see r20.03 of the Federal Circuit Court Rules 2001 (Cth); see also Conlan v Mladenis [2007] FCA 1129 at [4] – [5]. I also have regard to the principles set out by the Full Court in Bechara v Bates [2021] FCAFC 34 at [27]:27. Thus, relevant to the matter before us, the following is, and has been since the mid-1990s, clear about the nature of a de novo hearing by way of review of a sequestration order in bankruptcy made by a registrar:(a) The application for review leads to a hearing de novo of the creditor’s petition.(b) The hearing (or rehearing) of the creditor’s petition is not prosecuted by the debtor (applicant for review) but by the creditor in the proceeding in which the registrar’s order was made.(c) The application for review is a demand that the claim for relief (the sequestration order) be heard by a judge.(d) The onus is upon the creditor to prosecute its petition. The only onus of the debtor/bankrupt against whose estate a sequestration order has been made is to prove either solvency or any other sufficient cause under s 52(2) of the Bankruptcy Act 1966 (Cth).(e) An appreciation of the above considerations makes it evident that summary or default judgment terminating an application for review is highly likely to be misconceived and founded upon a misconception that the applicant for review has an onus to prosecute an application or to show error in the approach of the registrar.BACKGROUND The Applicant creditor is a business which includes services whereby pallets can be ‘rented’ by customers. The Respondent previously operated a company called Baby Blue Group Pty Ltd (“Baby Blue”). In or around June 2019, Baby Blue sought to open an account with the Applicant for the provision of pallets. The application for the account was completed by the Respondent and stated that Baby Blue had three employees. The Respondent provided a personal guarantee for the account, and the account was opened in or around October 2019. From that time, pallets were ordered on Baby Blue’s account and were provided to Baby Blue at its business premises in Woolgoolga, New South Wales. In February 2020, Baby Blue sought to close its account with the Applicant. The Respondent made several allegations, which are set out in greater detail below, in respect of certain orders made on Baby Blue’s account, and said that those orders were unauthorised and fraudulent. The Applicant undertook an internal investigation into the Respondent’s allegations and, in effect, found that the orders appeared to be made by an employee of Baby Blue, were sent from an email linked to Baby Blue, and the pallets were delivered to Baby Blue’s business premises prior to the Respondent seeking to close the account with the Applicant. The Applicant informed the Respondent that, prior to the account being closed, the pallets still retained by Baby Blue would have to be returned and all monies owed to the Applicant would have to be paid. Ultimately, in the absence of the return of the pallets or payment of the monies owed, the Applicant issued proceedings in the Local Court of NSW, in respect of the pallets, the monies owed by Baby Blue to the Applicant and the Respondent’s personal guarantee in respect of Baby Blue’s account.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Court is satisfied that the Applicant has proved the matters set out in s52(1) of the Bankruptcy Act, and the Court will make a sequestration order against the estate of the Respondent. CONCLUSION For these reasons, orders shall be made dismissing the Applicant’s review of the Registrar’s decision in this matter and a sequestration order will be made against the Respondent’s estate. An order will also be made for the Applicant’s costs of these proceedings to be taxed and paid from the sequestered estate, pursuant to the provisions of the Bankruptcy Act.

Ratio Decidendi

Legal Principle Established

The Applicant seeks to proceed with the creditor’s petition, and seeks that the sequestration order made by the Registrar remain in place and that the Applicant’s costs be taxed and paid with priority from the estate of the Respondent in accordance with the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”).CONSIDERATION As set out above, on 24 May 2021, the Respondent filed an application for review of the Registrar’s orders. Additionally, the Respondent sought orders that the Applicant be required to compensate him for depression, stress and loss of reputation, with the Court to determine the quantum of that compensation. The Respondent has filed four affidavits, those being on 21 May 2021, 7 June 2021, 16 June 2021 and 16 August 2021. By his affidavit filed on 21 May 2021, the Respondent states that, on 19 December 2019, he was the victim of domestic violence and that, from about that time, he was a home-maker and carer for both of his children, who were both under three years old at the time. As a result of these events, on or around 3 January 2020, the Respondent deposes to putting Baby Blue “on hold” and says that he then noticed that “all accounts in Woolgoolga had been illegally used and opened”. He then claims that there had been illegal use of Baby Blue’s account with the Applicant, and that the use of the account in relation to 520 pallets supplied by the Applicant, was done without authorisation, and therefore fraudulently. His affidavit of 7 June 2021 relates to significant health issues that he alleges he has experienced. His affidavit of 16 June 2021 states that, on 18 May 2019, he filled out Baby Blue’s supply application with the Applicant. That application is exhibited and shows that the company had three employees. A clear copy of the application is found at exhibit JLW1 which is annexed to the affidavit of Ms Wilcock, filed by the Applicant on 12 March 2021. The Respondent claims that, on 7 January 2020, he sent written notice in respect of Baby Blue vacating the business premises in Woolgoolga to the landlord. He further claims that on 24 January 2020, new tenants took over the premises in Woolgoolga, and that between 21 October 2019 and 7 January 2020, Baby Blue was on hold and vacating the property. He says that on 27 September 2019, an employee committed fraud by using the Respondent’s name and signature to apply for tenancy at a rental property in Woolgoolga. That employee is alleged to have “committed illegal transactions…accepted by CHEP Australia Ltd without any authorisation”. That employee is said to have used a personal Gmail account to order the pallets without authorisation. By his affidavit filed on 16 August 2021, the Respondent says that employee was never employed by Baby Blue, and instead assisted Baby Blue and was supplied with a business email address and mobile phone monitored by Baby Blue. The Applicant relies primarily on an affidavit of Ms Sandra Tadros filed on 13 August 2021. Ms Tadros is employed by the Applicant as a Bad Debt Recovery Specialist, and her affidavit is based on her knowledge and belief as well as on the information she has obtained from the business records of the Applicant.