Cheung v Maxims Entertainment Pty Ltd
[2002] FMCA 348
•17 December 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CHEUNG v MAXIMS ENTERTAINMENT PTY LTD | [2002] FMCA 348 |
| BANKRUPTCY – Annulment of bankruptcy – whether applicant was served with bankruptcy notice and petition – issue of solvency – whether the applicant made ‘full and true disclosure’. |
Bankruptcy Act 1966 (Cth), ss.52(2)(a), 109, 153B
Re Papps; Ex parte Tapp (1997) 78 FCR 524
| Applicant: | WING CHEUNG |
| Respondent: | MAXIMS ENTERTAINMENT PTY LIMITED |
| File No: | SZ 700 of 2002 |
| Delivered on: | 17 December 2002 |
| Delivered at: | Sydney |
| Hearing Date: | 17 December 2002 |
| Judgment of: | Raphael FM |
REPRESENTATION
| Counsel for the Applicant: | Mr R Winfield |
| Solicitors for the Applicant: | W. Chan & Co Solicitors |
| Counsel for the Respondent: | Mr S White |
| Solicitors for the Respondent: | Aubrey F. Crawley & Co Attorneys, Solicitors and Proctors |
ORDERS
Application dismissed.
Costs of the respondent and the trustee to be paid out of the estate of the bankrupt pursuant to s 109 of the Bankruptcy Act 1966 (Cth) and to be taxed if not agreed under the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SZ 700 of 2002
| WING CHEUNG |
Applicant
And
| MAXIMS ENTERTAINMENT PTY LIMITED |
Respondent
REASONS FOR JUDGMENT
In this matter the applicant seeks an annulment of his bankruptcy pursuant to s.153B of the Bankruptcy Act 1996 (Cth) (“the Bankruptcy Act”). A sequestration order was made against him on 16 July 2002. It is worth noting that the basis for the debt which founded the act of bankruptcy was the applicant's non-compliance with an agreement which had been entered into in order to prevent previous bankruptcy proceedings moving to sequestration.
The applicant claims there are two grounds under which I should consider annulling the bankruptcy. The first is that he was not served the creditor's petition or the bankruptcy notice and the second is that he is solvent.
At the commencement of these proceedings I made some decisions relating to the admissibility of affidavits including the affidavits of the process server who alleges that he served the applicant with both the bankruptcy notice and the bankruptcy petition.
The first matter in dispute is whether or not the bankrupt was served with the bankruptcy notice and the petition. They were both alleged to have been be served at restaurants in central Sydney. The bankrupt says he was not so served. He said he recognised the process server from seeing him once at a soccer field.
The bankrupt gave evidence. He is not a fluent English speaker and must be given some leeway because of the difficulty he has in understanding questions in cross-examination. However, his answers to questions were evasive and unresponsive. A letter (exhibit 1) was put to him. It indicated that his solicitor had ceased to act for him in the bankruptcy proceedings on 8 July 2002. This statement was in conflict with paragraph 7 of his affidavit of 23 September 2002 in which he deposes that Mr Chan (his solicitor) was acting for him at all times and was not given notice of the issue of the bankruptcy petition.
The process service, Mr Mullen, was called. His affidavits of service were read. I had previously dismissed the bankrupt's objections to those affidavits. Mr Mullen identified Mr Cheung and recalled serving him. He clarified that the words used in those affidavits "delivered personally" meant that on both occasions the documents were handed to Mr Cheung and he took them. Mr Mullen said that the documents were not just left in the bankrupt's presence.
The witness was cross-examined by counsel for the bankrupt. He agreed he had met Mr Cheung on a soccer field at Marrickville but denied he had not seen him since then. He recalled Mr Cheung was at the Marigold Restaurant for a soccer presentation. He agreed there was some hundred or more people there. He identified Mr Cheung from serving him previously at the soccer field and he had a photograph of him.
Mr Mullen recalled the service at the Regal Restaurant. He stated the restaurant was not that busy at the time, which was after 2 o'clock in the afternoon. He recalled that the bankrupt was sitting at a large table with another Asian gentleman. He said that Mr Cheung took the document.
I prefer the evidence of Mr Mullen to that of the bankrupt. I accept his evidence of service. I am satisfied the bankruptcy notice and the petition were both served on the bankrupt.
The evidence in relation to solvency from the bankrupt is very weak. There is no evidence that he can pay his debts as and when they fall due. It is accepted that the bankrupt owns an undivided share in a property which is valued at a figure in excess of its mortgage. But there is no suggestion that this property is about to be disposed of. The bankrupt has not filed a statement of affairs. He has not paid the petitioning creditor, notwithstanding that the debt was founded on a compromise agreement following earlier bankruptcy proceedings. This is a matter of serious concern. Nothing is known about any other creditors. The applicant says no others have been identified, the reason may be that no statement of affairs has been filed.
The secured creditor in relation to the property is being paid its mortgage, but this may be being done by the other joint tenant. It is said that the consumer credit information obtained by the Trustee shows no concern. That may be the case, but it may not.
An order under s.153B of the Bankruptcy Act 1966 (Cth) requires the court to say that the sequestration order ought not to have been made. The court would not say this on the basis of non-service. The court has found that the debtor was served. If he was solvent he could have made objection to the petition on the grounds contained in s.52(2)(a) of the Bankruptcy Act. He did not do that. I am satisfied that the applicant has not given full and frank disclosure. In Re Papps; Ex parte Tapp (1997) 78 FCR 524 at 531, O'Loughlin J said:
“The test, when a person comes to court seeking an annulment, is one that is akin to "full and true disclosure". It is incumbent upon such applicant to place before the court all relevant material with respect to his or her financial affairs so that the court may properly be informed to make a judgment that is based upon the full facts and circumstances. A person who seeks an annulment carries a heavy burden.”
I do not believe that Mr Cheung has satisfied that burden. I am not prepared to annul this bankruptcy. If Mr Cheung wishes to be released from his condition, there are avenues open to him which could secure payment to all his creditors and the Trustee.
I dismiss this application. I order that the costs of the respondent and of the Trustee be paid out of the estate of the bankrupt pursuant to s.109 of the Bankruptcy Act and taxed if not agreed under the Federal Court Rules.
I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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