Commonwealth Bank of Australia v Kapil

[2014] FCCA 810

FEDERAL CIRCUIT COURT OF AUSTRALIA

COMMONWEALTH BANK OF AUSTRALIA v KAPIL & ANOR [2014] FCCA 810

Catchwords:
BANKRUPTCY – Creditor’s petitions – where debtors have brought proceedings against third party in Supreme Court of New South Wales in relation to debt owed to petitioning creditor – where previous adjournments granted – where solicitor acting on contingency basis – whether to grant adjournment – where one respondent not subject to other proceedings – whether to grant sequestration order.

Legislation:  

Bankruptcy Act 1966 (Cth) s.52

Applicant: COMMONWEALTH BANK OF AUSTRALIA

First Respondent: SHEFALI KAPIL

Second Respondent: VISHIVE MOHAN KAPIL

File Number: SYG 3019 of 2012 

Applicant: COMMONWEALTH BANK OF AUSTRALIA

First Respondent: LALITA KAPIL

Second Respondent: RISHI KAPIL

File Number: SYG 3020 of 2012

Judgment of: Judge Raphael

Hearing date: 10 April 2014

Date of Last Submission: 10 April 2014

Delivered at: Sydney

Delivered on: 10 April 2014

REPRESENTATION

Solicitors for the Applicant: Gadens Lawyers

Solicitors for the Respondents: Beazley Singleton Lawyers

ORDERS in SYG 3019 of 2012

1. A sequestration order be made against the estate of Shefali Kapil.

2. The Applicant Creditor’s costs (including any reserved costs) be taxed and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966 (Cth).

3. The creditor’s petition against the second respondent be dismissed.

4. A copy of this order be provided to the Official Receiver in Sydney within 2 days.

THE COURT NOTES THAT

The date of the act of bankruptcy is 22 October 2012.

ORDERS in SYG 3020 of 2012

1. Matter adjourned to 16 June 2014 at 9.30am.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT SYDNEY

SYG 3019 of 2012

COMMONWEALTH BANK OF AUSTRALIA

Applicant

And

SHEFALI KAPIL

First Respondent

VISHIVE MOHAN KAPIL

Second Respondent

SYG 3020 of 2012

COMMONWEALTH BANK OF AUSTRALIA

Applicant

And

LALITA KAPIL

First Respondent

RISHI KAPIL

Second Respondent

REASONS FOR JUDGMENT

1. There comes before the court today the hearing of a bankruptcy petition brought against Shefali Kapil and Lalita Kapil.  The petitioning creditor is the Commonwealth Bank, and the creditor’s petitions were filed on 18 December 2012.  Those creditor’s petitions have now been extended until 18 December 2014.  There are three Kapil family members:  Lalita, Rishi and Shefali.  The first in age is Lalita Kapil, who is the mother of Rishi Kapil and the mother-in-law of Shefali Kapil.  There are petitions issued against all three members of the family.  The petition, number SYG 3020 of 2012, was issued only against Lalita Kapil and Rishi Kapil.  In matter SYG 3019 of 2012 is the petition against Shefali Kapil.

2. The Kapils were in business as franchisees of the Gloria Jean’s Coffee company.  They had, at all material times, three franchise premises.  It is a loan in respect of those franchise premises that brings the Commonwealth Bank to this court.  The Kapils have commenced proceedings against the Gloria Jean’s company, Jireh International Pty Ltd, for what they claim are breaches of the franchise agreement that resulted in Jireh selling one of the franchise premises and taking over the others.  It is alleged that Jireh is still running two of the franchises, in breach of the franchise agreement.

3. When the petition first came before me, on 12 August 2013, a number of adjournments had already been given.  On that first occasion I adjourned the petition for three days.  And then on 15 August 2013 gave leave to file an amended petition, and adjourned the matter to 22 October 2013.  It was at that stage that I learnt for the first time about the proceedings against Jireh International Pty Ltd.  The proceedings had reached a stage where I was able to see that the two plaintiffs in that case, Rishi and Lalita, appeared to have an arguable claim against Jireh.  And I was sensible of the fact that if I were to make a sequestration order against them that would be the end of the claim, as it was most unlikely that any trustee would take it up.  On the other hand, those parties’ solicitor, Mr Beazley, acting on a contingency basis;  was prepared to continue the proceedings.  I was aware that should the proceedings be successful the first charge upon any judgment was to the creditor, the Commonwealth Bank.  And so it seemed to me that it was in the interests of justice, and in the interests of creditors as a whole, that Mr Beazley be allowed to continue with those proceedings.

4. The matter came before the court again on 26 November 2013, when I was provided with further evidence about the conduct of the proceedings that led me to adjourn the matter until 11 December 2013.  On that day I further adjourned it until 27 February 2014, and on 27 February 2014 adjourned it till today.  On each occasion the adjournment was granted because I was satisfied that the proceedings in the Supreme Court were being continued as speedily as the plaintiffs were able, noting the reluctance of the defendants to comply with the timetable set down by that court.

5. However, as each adjournment was granted I became more concerned by the position of the Commonwealth Bank, which, as a creditor, is entitled to its remedy unless there are good reasons why that should not occur.  I have become particularly concerned that any proceedings in the Supreme Court of New South Wales may not be completed before the time the petition expires.  And I regard it as extremely unfair to adjourn the matter in such a way that the petition is allowed to expire, and the bank is required to commence new petition proceedings by the filing of a bankruptcy notice thereafter.

6. Today I was told that an amended defence has been filed to the proceedings by Jireh, who also filed a cross-claim against the plaintiffs.  I have seen some short minutes of order, which indicate that the defendants must file and serve all their evidence on or before 26 May 2014.  Mr Beazley tells me that the plaintiffs have filed all their evidence, although it seems to me that there will be some accounting evidence necessary, and that has not yet been filed.

7. The matter has been listed for further directions in the Supreme Court on 3 June 2014.  Mr Beazley tells me that on that date he will ask for the matter to be sent urgently to mediation and, if mediation fails, to be given an expedited hearing.

8. Whilst the Commonwealth Bank is as entitled as any other creditor to its remedy, it must be recognised that this is a very large organisation with very extensive assets, and that the debt owed to it is, in relation to those assets, miniscule.  It is no doubt charging the Kapils interest for every day upon which the debt remains outstanding, therefore, I am prepared, for one last time, to grant an adjournment before a hearing date of the Supreme Court proceedings is fixed.  If the debtors are to obtain any further indulgence from this court, the court would have to be satisfied that the proceedings will be completed before the petition expires.  When the court says “completed” it means that, barring eventualities, judgment will be given prior to 18 December 2014.

9. I foresee that when the directions hearing takes place on 3 June 2014, that an application will be made to place the matter in the hands of the expedition judge, and so in order to avoid an unnecessary further application to this court, I propose to adjourn the petition against Rishi and Lalita Kapil until 16 June 2014, when I am on bankruptcy duty.  I am hopeful that by that date Mr Beazley will be able to inform the court of a hearing of the Supreme Court proceedings.

10. Shefali Kapil is not a party to the Supreme Court proceedings, and in those circumstances I propose to hear the petition against her. In the matter of Shefali Kapil, I am satisfied that the respondent committed the act of bankruptcy alleged in the petition. I am satisfied of the proof of the other matters required by s.52 of the Bankruptcy Act 1966 (Cth). I make a sequestration order against the estate of Shefali Kapil. I order that the applicant creditor’s costs, including any reserve costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act.  The court notes the date of the act of bankruptcy is 22 October 2012.  A copy of this order must be provided to the Official Receiver in Sydney within two days.  The court will also make an order that the creditor’s petition against the second respondent, Vishive Mohan Kapil, be dismissed.

I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Judge Raphael

Associate: 

Date:  23 April 2014