Commonwealth Bank of Australia v Lam
[2018] FCCA 1568
•15 June 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COMMONWEALTH BANK OF AUSTRALIA v LAM | [2018] FCCA 1568 |
| Catchwords: PRACTICE AND PROCEDURE – Adjournment application – delay – hearing date after expiry of Creditors Petition. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.5, 40, 41, 43, 44, 52 Family Law Act 1975 (Cth), s.79 |
| Cases cited: Aon Risk Services v Australian National University [2009] HCA 27; (2009) 239 CLR 175; (2009) 83 ALJR 951; (2009) 258 ALR 14 |
| Applicant: | COMMONWEALTH BANK OF AUSTRALIA |
| Respondent: | CHAN THANH LAM |
| File Number: | PEG 282 of 2016 |
| Judgment of: | Judge Antoni Lucev |
| Hearing dates: | 27 and 28 February 2018 |
| Date of Last Submission: | 28 February 2018 |
| Delivered at: | Perth |
| Delivered on: | 15 June 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms K. Lendich |
| Solicitors for the Applicant: | Dentons |
| Respondent: | In person |
ORDERS
A Sequestration Order be made against the estate of Chan Thanh Lam.
The respondent debtor pay the applicant’s costs from the estate of the respondent debtor, which, if not agreed, are to be assessed by a Registrar of this Court pursuant to Part 40 of the Federal Court Rules 2011 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 282 of 2016
| COMMONWEALTH BANK OF AUSTRALIA |
Applicant
And
| CHAN THANH LAM |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, the Commonwealth Bank of Australia ACN 123 123 124 (“CBA”), by a Creditor’s Petition filed on 29 June 2016 seeks a sequestration order pursuant to s.43 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) as a judgment creditor against the estate of the respondent, Mr Chan Thanh Lam (“Mr Lam”) as a result of the Supreme Court of Western Australia entering judgment against Mr Lam (“Judgment”) in CIV 2563/2013 (“Supreme Court Proceedings”) in favour of CBA for the amount of $1,263,445.67 on 26 August 2014 (“Judgment Debt”).
The amount was allegedly owed pursuant to the terms of a loan agreement and guarantee under which Mr Lam owes a further $163,467.24 for additional interest and enforcement expenses from 26 August 2014 until filing of the Creditor’s Petition in this Court. The total sum said to be owing to CBA by Mr Lam is $1,426,912.91. Mr Lam opposes the Creditor’s Petition. Following a number of appearances and adjournments before Registrars of this Court the matter came on for final hearing before a Judge on 27 and 28 February 2018.
Background
The factual and procedural history of the matter prior to the filing of the Creditor’s Petition, limited to that which was seemingly consistent between CBA and Mr Lam, is as follows:
a)Mr Lam entered into two investment home loan agreements (“Loans”) with CBA which are the source of the Judgment Debt, the first loan was a co-borrowing agreement involving Mr Lam and three other parties and for the second loan Mr Lam acted as guarantor;
b)Mr Lam secured the Loans by way of a mortgage over two properties. Mr Lam is the registered proprietor of one of the properties (“Lockhart Street Property”), and his interest in this property is by way of a half share as joint tenant with his ex-wife, Mary Cheng (“Ms Mary Cheng”). Mr Lam is not a registered proprietor, nor does he have any other proven interest in the other secured property (“Edgecumbe Street Property”);
c)on 26 August 2014, CBA obtained the Judgment in the sum of the Judgment Debt against Mr Lam and Francis Hung Lam (“Mr Francis Lam”) (who is Mr Lam’s brother) and Andrea Man Yee Cheng (“Ms Andrea Cheng), who is Mr Francis Lam’s wife, as joint debtors. The Judgment against Mr Lam was obtained by default: Mr Lam was present at the hearing, but he did not defend the action, nor has he sought to set aside the Judgment, nor has he appealed the Judgment. Ms Mary Cheng was the second respondent in those proceedings and she continues to defend the action as against her;
d)on 6 January 2016 CBA alleges that Mr Lam was served with Bankruptcy Notice No. BN 186908 (“Bankruptcy Notice”) by CBA, and on 27 January 2016 Mr Lam applied to this Court to have the Bankruptcy Notice set aside;
e)on 13 June 2016 a Registrar of this Court dismissed Mr Lam’s application to set aside the Bankruptcy Notice;
f)on 29 June 2016 CBA issued the Creditor’s Petition, and served it on Mr Lam on 2 July 2016, in the Judgment Debt amount less the value of the Lockhart Street Property, being $670,000.00, leaving a total unsecured debt of $756,912.91;
g)on 30 June 2016 a consent to act as trustee was provided by Mr Malcolm Field in the event that a sequestration order was made against the state of Mr Lam, and that consent was provided on the same day to the Australian Financial Security Authority;
h)on 1 August 2016 Mr Lam filed a notice of appearance and a notice stating grounds of opposition (“Notice of Opposition”) with an accompanying affidavit;
i)on 29 May 2017, with leave of a Registrar, CBA filed an amended Creditor’s Petition, whereby the value of the Lockhart Street Property was amended to $600,000 and the total unsecured debt was amended to $826,912.91; and
j)on 16 October 2017 a Registrar referred the matter to a Judge of the Court for hearing, and on 24 November 2017 the matter was programmed for hearing on 27 and 28 February 2018.
Adjournment application
On 22 January 2018 the matter came before the Court for directions on an application by Mr Lam to adjourn the hearing to allow him more time to prepare and find a legal representative. The Court indicated the matter was filed in June 2016 and had been the subject of 10 adjournments by Registrars of this Court previously, and as such Mr Lam had had ample time to seek legal assistance, and Mr Lam’s delay did not warrant the grant of an adjournment. The Court also had regard to case management considerations expressed in Aon Risk Services v Australian National University [2009] HCA 27; (2009) 239 CLR 175; (2009) 83 ALJR 951; (2009) 258 ALR 14, in exercising the discretion not to adjourn the hearing date. In particular, that was because the then next available date for the Court to hear a two day matter was in June 2019 and would have required the Court to extend the Creditor’s Petition beyond its permitted life of 24 months: Bankruptcy Act, s.52(5), and to further protract these proceedings to the prejudice of CBA, and contrary to the objects of the Federal Circuit Court of Australia Act 1999 (Cth) (“FCCA Act”), s.3(2)(b) (“use streamlined procedures”) and the Federal Circuit Court Rules 2001 (Cth) (“FCC Rules”), rr.1.03(2) (“use streamlined processes”) and (4) (“parties must … avoid undue delay”). For these reasons the Court did not adjourn the matter from the listed dates and the hearing proceeded on 27 and 28 February 2018.
Evidence
For the purpose of these proceedings the following affidavits were read and put into evidence, subject to the objections referred to at [8] below, and the oral evidence of the four witnesses called at hearing: see [6] below:
a)affidavit of Emerald Denise Petrie sworn 12 January 2016 (“Petrie Affidavit”) providing the requisite affidavit of service of Bankruptcy Notice required by the Federal Circuit Court of Australia (Bankruptcy) Rules 2016 (Cth) (“FCC Bankruptcy Rules”), r.4.04(1)(b);
b)affidavit of Courtney Jayne Manzoney affirmed on 29 June 2016 (“First Manzoney Affidavit”) providing the requisite affidavit of search required by the FCC Bankruptcy Rules, r.4.04(1)(a);
c)affidavit of Lyndon Jakob sworn 11 July 2016 (“Jakob Affidavit”) providing the requisite affidavit of service of the Creditor’s Petition: FCC Bankruptcy Rules, r.4.05;
d)affidavit of Chan Thanh Lam sworn 1 August 2016 (“August 2016 Lam Affidavit”);
e)affidavit of Slav Stamef sworn on 27 June 2017 (“First Stamef Affidavit”) providing the requisite affidavit of debt required by the FCC Bankruptcy Rules, rr.4.05 and 4.06(4);
f)affidavit of Courtney Jayne Manzoney affirmed 26 June 2017 (“Second Manzoney Affidavit”) as to the service of the amended Creditor’s Petition and the requisite affidavit of debt required by the FCC Bankruptcy Rules, r.4.06(4);
g)affidavit of Chan Thanh Lam sworn 16 September 2017 (“First Lam Affidavit”) providing documentation as to valuations obtained regarding the Lockhart Street Property, and information on the likely “value” of the Edgecumbe Street Property (as he said he was unable to obtain access to the Edgecumbe Street Property for the purpose of undertaking a licensed valuation);
h)affidavit of Kylie Maree Britton sworn 16 January 2018 (“Britton Affidavit”) annexing the Certificate of Title searches on the Lockhart Street and Edgecumbe Street Properties;
i)affidavit of Jessie Lee Klaric sworn 16 January 2018 (“Klaric Affidavit”) referring to the entry of the Judgment by default against Mr Lam;
j)affidavit of Chan Thanh Lam sworn 29 January 2018 (“Second Lam Affidavit”) in which Mr Lam recounted the factual background of the proceedings and various documents relating to proceedings in the Family Court of Western Australia (“Family Court Proceedings”);
k)affidavit of Mr Francis Lam sworn 1 February 2018 (“Mr Francis Lam’s Affidavit”). Mr Francis Lam and Ms Andrea Cheng are other persons named as parties in the Supreme Court Proceedings, and Mr Francis Lam’s Affidavit sets out Mr Francis Lam’s position in regard to the Judgment and proceedings commenced against him;
l)affidavit of Slav Stamef sworn 21 February 2018 (“Second Stamef Affidavit”) reconfirming the amount owed by Mr Lam, and responding to certain assertions made in the August 2016 Lam Affidavit and the First and Second Lam Affidavits, regarding the enforcement of the Judgment against two other parties;
m)affidavit of Shane Edward Calalesina sworn 23 February 2018 (“Calalesina Affidavit”) providing information on the latest developments in the Supreme Court Proceedings;
n)affidavit of Slav Stamef sworn 26 February 2018 (“Third Stamef Affidavit”) providing the requisite affidavit of debt required by the FCC Bankruptcy Rules, r.4.06(4); and
o)affidavit of Courtney Jayne Manzoney affirmed on 26 February 2018 (“Third Manzoney Affidavit”) providing the requisite affidavit of search required by the FCC Bankruptcy Rules, r.4.04(1)(a).
At hearing four witnesses were called, as follows:
a)Mr Slav Stamef (who was granted leave pursuant to s.66 of the FCCA Act to appear by video-link from Sydney);
b)Ms Emerald Denise Petrie;
c)Mr Lam; and
d)Mr Francis Lam.
The following materials were tendered at hearing by CBA and marked accordingly:
a)the annexures referred to in the Second Stamef Affidavit were marked as Exhibit 1;
b)the “Field Record Sheet” detailing notes as to the service of the Bankruptcy Notice on Mr Lam proved by Ms Petrie when under examination was marked as Exhibit 2 (“Process Server’s Notes”);
c)an affidavit of Chan Thanh Lam sworn 27 January 2016 in proceedings to set aside the Bankruptcy Notice was marked as Exhibit 3 (“January 2016 Lam Affidavit”); and
d)another affidavit sworn 23 March 2016 by Chan Thanh Lam in the proceedings to set aside the Bankruptcy Notice was marked as Exhibit 4 (“March 2016 Lam Affidavit”).
Objections to evidence
CBA took objection to parts of affidavits of Mr Lam and Mr Francis Lam’s Affidavit. Following consultation between the parties some objections were not pressed, some were said to go to weight, and some were conceded. It was therefore unnecessary for the Court to rule on the objections, and the paragraphs, or parts thereof, which were conceded and therefore struck out in each affidavit are as follows:
a)August 2016 Lam Affidavit: paragraphs 30, 34, 37, 38, 39 (from the words “but if they are successful in the sale, possibly that the sale price …”), 40, 41, 48 and 49;
b)First Lam Affidavit: paragraphs 32 to 35 inclusive;
c)Second Lam Affidavit: paragraphs 31, 36, 48, 51, 69, 73, 74, 81, 84 and 88 to 91 inclusive; and
d)Mr Francis Lam’s Affidavit: paragraphs 7, 11, 27, 34, 50 (but only the words “an again at the Mediation Conference”), 58, 60 (first and second sentences), 61 (only the word “legitimate”), 62 and 66.
Formal requirements for a sequestration order
The formal requirements for the issuance of a sequestration order under the Bankruptcy Act are as follows:
a)that the Bankruptcy Notice refers to a final judgment or order for an amount “of at least $5,000”: Bankruptcy Act, s.41;
b)the presence of the debtor or his estate within Australia: Bankruptcy Act, s.43;
c)that “there is owing by the debtor to the petitioning creditor a debt that amounts to $5,000”: Bankruptcy Act, s.44(1)(a); and
d)proof to satisfy the matters set out in s.52(1) of the Bankruptcy Act.
Pursuant to s.52(1) of the Bankruptcy Act, at the hearing of the Creditor’s Petition the Court requires proof of:
a)the matters stated in the Creditor’s Petition (for which purpose the Court may accept the affidavit verifying the Creditor’s Petition as sufficient proof);
b)service of the Creditor’s Petition; and
c)the fact that the debt or debts relied upon are still owing.
Part 4 of the FCC Bankruptcy Rules requires that CBA file affidavits:
a)verifying the Creditor’s Petition;
b)of search of court records;
c)of service of the Bankruptcy Notice;
d)of search of the NPI Index; and
e)of debt still owed by Mr Lam,
those affidavits going to the fulfilment of the requirements of s.52(1) of the Bankruptcy Act.
On proof of the matters in s.52(1) of the Bankruptcy Act “the Court will generally proceed to make an order for sequestration”: Totev v Sfar & Anor [2008] FCAFC 35; (2008) 167 FCR 193; (2008) 247 ALR 180; (2008) 5 ABC(NS) 691; (2017) 15 ABC(NS) 222; (2017) 122 ACSR 115 at [37] per Emmett J (“Totev”). Where the Court is satisfied the formal requirements pursuant to s.52(1) of the Bankruptcy Act are satisfied, the onus thereupon shifts to the debtor to prove there is an ‘other sufficient cause’ for the Court not to grant the sequestration order: Ling v Enrobook Pty Ltd (1997) 74 FCR 19; (1997) 143 ALR 396; FCR at 24 per Davies, Wilcox and Branson JJ (“Enrobrook”); Cain v Whyte (1933) 48 CLR 639; (1933) 6 ABC 117; (1933) 6 ALJ 457 at 646 per Rich, Starke, Dixon, Evatt and McTiernan JJ.
At hearing, and for the first time, Mr Lam raised a contention that the Bankruptcy Notice had not been served upon him.
Contentions raised on the service of the Bankruptcy Notice
In circumstances where the Court is called on to determine if service has in fact been effected, in Horman v Distribution Group Ltd [2002] FCA 219 at [33] per Emmett J approved a statement made in the judgment under appeal, Horman v Distribution Group Ltd [2001] FMCA 52 at [23] per Raphael FM:
Tribunals and courts of law are frequently asked to decide which of two versions of a series of facts they accept. It is often a very difficult task, particularly where both witnesses are credible. The decisions are made with the benefit of a number of factors. Perhaps the most important is each witness' demeanour in the witness box, his or her method of giving the evidence, the way questions are answered in cross-examination, the willingness to acknowledge the possibility of error and changes in recollection due to the passage of time. Other matters that would be looked at would be the interest that the witness might have in the outcome of the proceedings and the inherent likeliness or unlikeliness of the evidence when considered with the background of the known facts.
At hearing Mr Lam sought to raise for the first time that he was not personally served the Bankruptcy Notice. The onus is on the person who alleges that service was not properly affected: Satchithanantham v Multilink Investments Pty Ltd [2002] FMCA 84 at [9] per Driver FM. With leave of the Court, Mr Lam was allowed to file additional written submission on the issues he sought to raise regarding the service of the Bankruptcy Notice, and submitted:
a)the Petrie Affidavit asserted the Bankruptcy Notice was served on me on 6 January 2016 at 7.10pm at 180 Lawley Street Yokine and Ms Petrie stated “Are you Chan Thanh Lam, one of those respondents in these Proceedings and I responded Yes”;
b)despite deposing that he was served the Bankruptcy Notice, the original Affidavit proforma he used was prepared by Murfett Legal who represented Mr Lam, his brother and another party in the set-aside application in which all three defences were similar copies of each other and as an oversight, these were a straight copy and paste of each other;
c)he does not reside at 180 Lawley Street Yokine, rather this is his parent’s home, he has not previously avoided service and CBA had previously served him by way of email and post at his residential address at 250C Ewen Street Woodlands and if he was to avoid service;
d)he has two brothers also with the middle name “Chan”; and
e)CBA has not relied on any due diligence in properly checking valid and updated addresses prior to its service, it has assumed the addresses to be correct rather than incorrect and proper service was affected following dispatch.
During his cross-examination of Mr Stamef and Ms Petrie, Mr Lam sought to press this point. Mr Stamef, given his role as an officer of CBA’s Complex and Specialised Portfolio area working from Sydney was unsurprisingly, unable to provide any information as to the service process. Ms Petrie, the process server was called, and during examination the Process Server’s Notes were provided and Ms Petrie explained them and what the various indications and markings represented. Notably:
a)Ms Petrie said she did not recognise Mr Lam in the courtroom;
b)the Process Server’s Notes indicated that when Ms Petrie allegedly served Mr Lam he responded yes, and there were no language difficulties or any indication that the person served had not understood what was happening; and
c)Ms Petrie served the document on Mr Lam at an address other than that on the Bankruptcy Notice as during the period she was seeking to serve him it was revealed he may be served at that other address.
The Court notes Ms Petrie was unable to identify Mr Lam as the person she served on 6 January 2016. That inability to identify Mr Lam (who had no obviously discernible distinguishing features) is unremarkable more than two years after the event. This failure to identify Mr Lam in Court does not matter particularly, as a process server cannot be expected to remember one case from another, but rather they should:
… perform their functions in an acceptable way, should make meaningful and accurate notes as soon after the event as possible of conversation which has occurred, and of any other events which may be relevant to the question of identification of the party served.
Re Stec; Ex parte Scragg (1997) 75 FCR 377; (1997) 155 ALR 173; FCR at 383-384 per von Doussa J (“Scragg”).
During cross-examination of Mr Lam the following was revealed:
a)Mr Lam does not want to be declared bankrupt, and he will do anything he can to avoid this happening;
b)during the proceedings before the Registrar seeking to set aside the Bankruptcy Notice at no time was the issue of service of the Bankruptcy Notice raised, notwithstanding that Mr Lam had legal representation at the time; and
c)Mr Lam has sworn a number of affidavits, including the January and March 2016 Lam Affidavits, stating he was served with the Bankruptcy Notice, and that he had prepared the March 2016 Lam Affidavit himself.
In relation to Mr Lam’s case the Court further notes that:
a)the statement made by Ms Petrie in serving the Bankruptcy Notice included the words “are you … one of those respondents in these Proceedings”, and it is unlikely that another person would have responded “yes” to that, even if their name was similar to that of Mr Lam, at least without querying what the proceedings were;
b)Mr Lam called no evidence from any person present at 180 Lawley Street, Yokine where Ms Petrie says that she served the affidavit, and in particular no evidence from either Mr Lam’s father or his brothers, whom it might be inferred from Mr Lam’s submissions that he suggests were served, rather than him, and the Court notes that evidence to that effect from Mr Lam’s father or brothers might have been conclusive in relation to the issue, and the failure to call them is surprising, and might be accounted for on the basis that their evidence would not have assisted Mr Lam; and
c)there was no evidence given by any person from Murphett Legal as to any oversight in relation to the preparation of any affidavit for the purposes of endeavouring to set aside the Bankruptcy Notice, in circumstances where if a solicitor preparing such an affidavit had made such an error, their duty as an officer of the Court would be to give such evidence if asked to give evidence in these proceedings. Again, the failure to call that evidence might be accounted for on the basis that the evidence would not have assisted Mr Lam.
In circumstances where Mr Lam has previously lodged an application in this Court to set aside the Bankruptcy Notice, which was unsuccessful, but in respect of which he affirmed in each of the January and March 2016 Lam Affidavits that he was served, the Court refers to Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2003] QSC 98; [2004] 1 Qd R 140 at [8] per Helman J, referring to Pino v Prosser [1967] VR 835 at 838 per McInerney J, that the conclusion a party had not been served validly would be one which is:
… remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ … should be held not to have been served.
In light of the evidence before the Court, and in particular that:
a)in proceedings to set aside the Bankruptcy Notice, in which Mr Lam was for some time legally represented, he affirmed in each of the January and March 2016 Lam Affidavits that he had been served with the Bankruptcy Notice;
b)the issue of service was first raised at hearing by Mr Lam, and he did not provide any written submissions on the point prior to the hearing, or give any indication to place CBA on notice he sought to raise such issue;
c)Mr Lam conceding in cross-examination he would do anything to resist being made bankrupt; and
d)Mr Lam failed to call any evidence from anyone present at the residence in Yokine where Ms Petrie served the Bankruptcy Notice, or from any person (and in particular his father or brothers) that they were served rather than Mr Lam, and failed to call any evidence from his former solicitors as to the alleged oversight in the preparation of the affidavits affirming that he had been served with the Bankruptcy Notice,
the Court finds the Bankruptcy Notice was served on Mr Lam on 6 January 2016, thereby meeting the requirements of s.52(1) of the Bankruptcy Act as to service of the Bankruptcy Notice.
Consideration of formal requirements
The Court is satisfied the formal requirements in s.52(1) of the Bankruptcy Act are met in this case by reason of the following matters:
a)on 26 August 2014, CBA obtained Judgment in Supreme Court proceeding CIV 2563/2013 in the amount of the Judgment Debt against Mr Lam: Petrie Affidavit;
b)on 9 December 2015, a Bankruptcy Notice was issued by CBA against Mr Lam based on the unsatisfied Judgment Debt, and the Bankruptcy Notice was personally served on Mr Lam on 6 January 2016: Petrie Affidavit;
c)Mr Lam, following dismissal of his application to set aside the Bankruptcy Notice, failed to comply with the Bankruptcy Notice, and thus committed an act of bankruptcy: Bankruptcy Act, s.40(1)(g);
d)on 29 June 2016, being within 6 months of the act of bankruptcy CBA filed the Creditor’s Petition verified by affidavit: First Manzoney Affidavit;
e)the Creditor’s Petition and affidavits verifying the Creditor’s Petition and Amended Creditor’s Petition were served on Mr Lam on 2 July 2016 and 30 May 2017 respectively: Jakob Affidavit and Second Manzoney Affidavit;
f)pursuant to r.4.06(3) of the FCC Bankruptcy Rules, CBA undertook a search of the National Personal Insolvency Index (“NPI Index”) which did not reveal any relevant debt agreement on the day the Creditor’s Petition was filed or on the day when the search of the NPI Index was made: Second Manzoney Affidavit;
g)CBA confirmed the Debt remains owing and the other matters required by r.4.06(4) of the FCC Bankruptcy Rules on 27 June 2016: First Stamef Affidavit; and
h)prior to the hearing scheduled for 27 and 28 February 2018, CBA confirmed the Judgment Debt remains owing and accruing interest and enforcement amounts as required by r.4.06(4) of the FCC Bankruptcy Rules: Third Stamef Affidavit.
Therefore, all formal requirements of s.52(1) of the Bankruptcy Act are met and the Court is prima facie satisfied that a sequestration order ought to issue.
Section 52(2) of the Bankruptcy Act
Section 52(2) of the Bankruptcy Act provides that the Court may dismiss the Creditor’s Petition if it is satisfied that Mr Lam is able to pay his debts: Bankruptcy Act, s.52(2)(a), or that a sequestration order ought not be made for “other sufficient cause”: Bankruptcy Act, s.52(2)(b), and the onus of proof in that regard is on Mr Lam: Enrobook at 24 per Davies, Wilcox and Branson JJ. For a matter to constitute sufficient cause to decline to make a sequestration order the matter must be one of significant weight to displace the interest of the community in avoiding insolvent trading: Ramsay Health Care Australia Pty Ltd v Compton (No.2) [2017] FCA 629 at [26]-[37] per Flick J (“Compton (No.2)”).
Ability to pay the debt – grounds 1, 2 and 7
Grounds 1, 2 and 7 of the Notice of Opposition appear to contend that Mr Lam has the ability to pay the Judgment Debt. The Court has considered grounds 1 and 2 of the Notice of Opposition together, and ground 7 separately below.
Grounds 1 and 2
Grounds 1 and 2 of the Notice of Opposition are as follows:
1. The basis in issuing the Bankruptcy Notice BN 186908 claiming that the unsecured $5000 threshold required by s44(2) of the Bankruptcy Act has not been met.
2. The debt outlined in the Creditors Petition is fully secured by a mortgage over two (2) separate properties.
Relevantly, s.44 of the Bankruptcy Act states:
Conditions on which creditor may petition
(1) A creditor's petition shall not be presented against a debtor unless:
(a) there is owing by the debtor to the petitioning creditor a debt that amounts to $5,000 or 2 or more debts that amount in the aggregate to $5,000, or, where 2 or more creditors join in the petition, there is owing by the debtor to the several petitioning creditors debts that amount in the aggregate to $5,000;
(b) that debt, or each of those debts, as the case may be:
(i) is a liquidated sum due at law or in equity or partly at law and partly in equity; and
(ii) is payable either immediately or at a certain future time; and
(c) the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition.
(2) Subject to subsection (3), a secured creditor shall, for the purposes of paragraph(1)(a), be deemed to be a creditor only to the extent, if any, by which the amount of the debt owing to him or her exceeds the value of his or her security.
(3) A secured creditor may present, or join in presenting, a creditor's petition as if he or she were an unsecured creditor if he or she includes in the petition a statement that he or she is willing to surrender his or her security for the benefit of creditors generally in the event of a sequestration order being made against the debtor.
CBA’s submissions
CBA submits that:
a)there is only one relevant security and that is over the Lockhart Street Property, as Mr Lam is not the registered proprietor of the Edgecumbe Street Property, nor does he have any other interest in the Edgecumbe Street Property which has been disclosed or proven: see the Certificates of Title annexed to the Britton Affidavit;
b)the value of the Lockhart Street Property must be considered in light of Mr Lam’s joint half share being a tenancy in common with Ms Mary Cheng, and therefore:
i)CBA’s valuation of the property at $300,000 leaves a shortfall of $963,445.67; or
ii)Mr Lam’s claim of the property valuation being $345,000 leaves a shortfall of $918,445.67; and
iii)as Mr Lam’s interest is jointly held with Ms Cheng his share of the value may be further reduced to $150,000 leaving a shortfall of $1,113,445.67, or $172,500 and $1,090,945.67 on Mr Lam’s valuation evidence;
c)on a proper construction of s.5 of the Bankruptcy Act, a “secured creditor” is one in respect of the “property of the debtor,” and Mr Lam has not proved any interest in the Edgecumbe Street Property, thus only the Lockhart Street Property is relevant to this application: Florance, Re; Ex parte Turimetta Properties Pty Ltd (1979) 28 ALR 403; (1979) 36 FLR 256;
d)regardless of the property valuation issues, the $5,000 threshold is clearly met on both valuations and as Mr Lam does not have a 100% interest in the property he, at its highest, may only be attributed with 50% of the value: Re Francis & Anor; Ex parte Official Trustee in Bankruptcy (1988) 19 FCR 149; (1988) 82 ALR 335; [1988] ANZ ConvR 585;
e)in any event, on Mr Lam’s best case (where he is attributed 100% of the value of the Lockhart Street Property) CBA has an unsecured debt of $573,445.70. This far exceeds the threshold. There is also a further amount claimed for interest and enforcement expenses of $163,467.24: Stamef Affidavits;
f)to the extent that Mr Lam contends that a formal valuation should have been adduced there is no statutory requirement to set out the estimated amount of the value of CBA’s security, only the particulars, and there is nothing to suggest that the estimate of the value is not given in good faith, and not in an arbitrary or capricious manner, rather, it is only slightly less than the security estimate given by Mr Lam: Bryant v Commonwealth Bank of Australia (unreported, Full Court of the Federal Court of Australia, Beaumont, Whitlam and Moore JJ, 24 November 1995) at [25] per Beaumont, Whitlam and Moore JJ);
g)unless Mr Lam is able to satisfy the Court that CBA has acted in an arbitrary or capricious manner in arriving at its valuation, then the Court should accept the estimate contained in a verified affidavit: Re Button; Ex parte Voss [1905] 1 KB 602; Biron Capital Limited v Anstee [2005] FMCA 1100 at [28] per Driver FM; and
h)further and in any event, if the Lockhart Street Property was to be sold by the mortgagee, a trustee or the registered proprietors, consideration would need to be given for sale commission and other costs associated with a sale.
Mr Lam’s submissions
Mr Lam states:
a)on 30 May 2017, an amended Creditor’s Petition advised that the valuation of the Lockhart Street Property had been revised from $670,000 to $600,000 without providing any justification of how this valuation was determined, and Mr Lam had the property valued by Valuations at $690,000 in September 2017;
b)the combined value of the two properties is between $1,690,000 to $1,790,000;
c)the debt pursuant to the Bankruptcy Notice for the Judgement Debt was for the amount of $1,263,445.67, and the debt claimed under the Creditor’s Petition is for the amount of $1,426,912.91, inclusive of additional interest and enforcement cost of $163,467.24, yet the additional interest and enforcement cost has not been agreed or assessed and CBA has not justified these;
d)it is clear the valuation of the Lockhart Street and Edgecumbe Street Properties at the minimum would exceed the default judgement by $426,554.33 and the unsubstantiated Creditor’s Petition debt by $263,087.09. This exceeds the threshold for which the Bankruptcy Notice can be enforced;
e)CBA has disregarded the fact the registered proprietor, Ms Mary Cheng, was Mr Lam’s wife at the time the property was purchased and that this was the basis of his being a guarantor to the loan, and that his interest in the Edgecumbe Street Property along with other properties registered in Ms Mary Cheng’s name are also the subject of the Family Court Proceedings commenced in 2012 regarding matrimonial assets. As part of any dispute, the parties have a chargeable interest in the assets regardless of proprietorship;
f)the funds held in the Commonwealth Bank of Australia account (“CBA Account”) are in and around $328,192 and are in the names of the Mr Lam and Ms Mary Cheng;
g)Mr Lam’s guarantee to a loan taken out by Ms Mary Cheng and secured against the matrimonial home (the Edgecumbe Street Property) would entitle him to a charge or claim over that property and as the validity of the security is yet to be determined by the Supreme Court and if the Mr Lam has suffered a loss as a result of the guarantee for whatever reason, this would give rise to a counterclaim against Ms Mary Cheng and the CBA.
Consideration
The debt must exceed the $5,000 threshold at the time of the act of bankruptcy, at the time of the presentation of the creditor’s petition and finally at the time of the hearing before the Court: Taylor v Commissioner of Taxation (1987) 16 FCR 212; (1987) 73 ALR 219; (1987) 18 ATR 715 at 216 per Woodward and Northrop JJ; Bankruptcy Act, s.52(1)(c); Re Snowden; Ex parte Deputy Commissioner of Taxation (Vic) [1970] ALR 229 at 230 per Gibbs J. While the debt must exceed the statutory minimum, the exact amount of the debt need not be proven: Bankruptcy Act, s.52(2).
In circumstances where Mr Lam seeks to suggest he has the ability to pay his debts to the bank it is not enough for Mr Lam to show the his assets exceed his liabilities, rather Mr Lam must establish the assets are available and are capable of realisation in a relatively short amount of time: National Australia Bank Ltd v Oberg [2012] FMCA 233; Sandell v Porter (1966) 115 CLR 666; (1966) 40 ALJR 71; CLR at 670 per Barwick CJ. Setting aside the question of the extent to which Mr Lam’s claims over the relevant assets might be upheld, the assets are not, however, capable of ready realisation, in the relatively foreseeable future, where the Supreme Court Proceedings are still on foot, seemingly fiercely contested, and without a trial date or any indication as to when those proceedings might ultimately conclude. Further, there are orders in the Family Court Proceedings freezing the joint assets of Mr Lam and Ms Mary Cheng, and the Family Court Proceedings are adjourned sine die pending the resolution of the Supreme Court Proceedings. Even on a conservative assessment the conduct of a multi-day trial in the Supreme Court, the seeming inevitability of a reserved judgment, an assumption that those proceedings are determined in a manner which then enables Mr Lam to proceed with the Family Court Proceedings, which, assuming that they are ready to go to trial, must then be listed, heard and determined, suggests that none of the assets over which Mr Lam lays claim will be ripe for realisation for at least two to three years. In any event, the Court does not consider that realisation of the relevant assets at this point in time would yield a sum of money which would enable Mr Lam to pay the debt owed to CBA. On a best case scenario for Mr Lam he is entitled to $172,500 for his share of the Lockhart Street Property; $550,000 for an equal share in the matrimonial property, that being the Edgecumbe Street Property (based on the valuation in his evidence), and $164,000 of the $328,000 held in the CBA Account. That leaves Mr Lam still indebted to CBA by several hundred thousand dollars.
In all of the above circumstances there is no doubt that the debt presently owing by Mr Lam exceeds $5,000, and subject to what is said in relation to ground 7 below, that Mr Lam is not presently able to pay those debts, or realise assets within a reasonable timeframe to pay those debts.
To the extent Mr Lam raised issue with his being a witness to the mortgage agreement over the Edgecumbe Street Property with Ms Mary Cheng, and acting as a guarantor, the Court was not taken to anything which suggests that it was unlawful for Mr Lam to witness the loan agreement as guarantor, and as such there is nothing which appears to arguably render the mortgage or loan agreement invalid. In any event, this matter appears to be part of Ms Mary Cheng’s defence in the Supreme Court Proceedings, and that issue is unlikely to be determined for some considerable period of time, for reasons set out above, and therefore will not give rise to a capacity in Mr Lam to realise any interest that he may have in the Edgecumbe Street Property.
Ground 7
This ground relates to Mr Lam proving he is solvent, and that he has funds, or that funds are realisable, to enable him to pay the Judgment Debt.
CBA states:
a)the amount held in the CBA Account is a “trust account pending the resolution of the FCWA Proceedings,” and order 3 of the Family Court order refers to the parties being enjoined and restrained from dealing with the funds until further order of the Family Court, and there is no evidence that the orders of the Family Court have been altered or discharged;
b)there is no evidence that Mr Lam is entitled to those funds, be it in full or partially, nor as to when (or if) there is likely to be a resolution of the Family Court Proceedings which would allow the funds to become available to him; further
c)no evidence was put that Mr Lam is able to pay the unsecured component of the debt set out in the Creditor’s Petition “as and when” it fell due for payment, and in any event, the amount held in the CBA Account is not sufficient.
Mr Lam made the following submissions
a)funds, in or around $328,000 being held in escrow in the CBA Account in the joint names of Mr Lam and Ms Mary Cheng;
b)the original funds in the CBA Account were in excess of $500,000 and deposited around February 2012, though an earlier affidavit Mr Lam stated the account was opened on 20 August 2012, and since then the monies in the CBA Account have earned virtually nil interest despite requests to CBA for it to be placed in a high interest bearing account or used to offset the home loans the subject of this Creditor’s Petition; and
c)the CBA Account has earnt interest at 0.01% per annum since inception, despite CBA charging interest on its Judgement Debt at 5.17%, highlighting the disparity and unfairness in the interest charged by CBA despite knowing the issues at hand.
For the reasons set out above in relation to grounds 1 and 2, ground 7 does not establish that Mr Lam is able to pay the debt owed to the CBA.
Other Sufficient Cause
In the Notice of Opposition filed by Mr Lam on 1 August 2016 the following grounds were stated:
3. The Proceedings (CIV 2563/2013) in which Default Judgement is obtained in issuing the Bankruptcy Notice and therefore the Creditors Petition is still on-going with another coborrower. The Applicant has not obtained Judgement against this co-borrower and I am still listed as a Defendant. The defence of the co-borrower states;
a. The entire debt has been paid and/or repaid to the Applicant
b. The mortgage over the secured properties are invalid
c. Amongst other claims
4. There are Other Legal Proceedings on foot involving the two secured properties, one of which is heard concurrently with The Proceedings (CIV 2563/2013).
5. The Local Government (City of South Perth) is currently considering a sale under the Local Government Act 1995 of one of the secured properties over an outstanding debt.
6. I have a legitimate grievance claim or cross demand claim against the applicant based on the reasons outlined in the above (3), (4) and (5) if the secured properties are somehow invalid or sold making them unsecured.
7. There are substantial funds held with the Applicant in an escrow bank account ordered by the Court pending the resolution of these Proceedings.
8. Additional interest charges and enforcement costs claimed have not been agreed and/or assessed. There is a disparity in interest charges debited by the Applicant against the Judgement debt and that credited by the Applicant against the funds held in the escrow account. Enforcement cost claimed by the Applicant seems to be quite considerable.
9. The issue of the Bankruptcy Notice is an abusive of process.
Each of these grounds is addressed below. Ground 7 has been considered again having regard to the comments of the Federal Court in Hutchings v Australian Securities and Investments Commission [2017] FCA 858 (“Hutchings”).
Grounds 3, 4 and 7
It is unclear in grounds 3 and 4 precisely what Mr Lam is purporting to suggest is an “other sufficient cause” not to issue a sequestration order. At best, it appears that Mr Lam is suggesting that if the Supreme Court Proceedings, the Family Court Proceedings, and other legal proceedings which appear to be on foot (but about which there is no particular evidence) are concluded in a manner favourable to him, or in a manner which allows the real property and cash assets that he says he has, or has an interest in, to be realised, that the money thereby raised would be sufficient to pay the Judgment Debt.
In relation to grounds 3 and 4 CBA submitted that:
a)Mr Lam does not dispute that the Judgment is against him, and accepts that he did not file a defence to CBA’s writ of summons in the Supreme Court Proceedings, he has not made any application to set aside the Judgment, nor has he provided the basis of any defence he would have to CBA’s claim if the Judgment were to be set aside, but rather he references the defence of Ms Mary Cheng in the Supreme Court Proceedings;
b)this appears to appeal to the Court’s discretion to adjourn the Creditor’s Petition as opposed to its dismissal, however the Creditor’s Petition has been adjourned on seven occasions to allow Mr Lam to attempt to resolve the “other proceedings”, and he has not done so;
c)there is no updated evidence before the Court as to where the various other proceedings are currently at, including if they are to be resolved in the short term; and
d)therefore, as the Creditor’s Petition is due to expire on 28 June 2018 the matter should be determined.
In relation to grounds 3 and 4 Mr Lam submitted that:
a)he is still listed as a defendant in the Supreme Court Proceedings in which Judgment was awarded against him as Ms Mary Cheng continues to defend the action;
b)CBA has not yet been able to obtain judgment against Ms Mary Cheng, which is preventing CBA from obtaining possession of the Lockhart Street Property of which she is registered as a co-owner, and the Edgecumbe Street Property of which she is registered as sole owner, thereby preventing satisfaction of the Judgment Debt claimed by CBA;
c)he only agreed to take out the loans the subject of the Judgment on the basis that there was sufficient security taken by CBA to secure the loan amounts, and he says he would not have taken out the loans if it was explained to him that there was a possibility that CBA's security would not be valid and he could possibly be personally liable for a large unsecured debt shortfall in excess of $1,200,000;
d)accordingly, upon determination of the various related proceedings:
i)if CBA is successful against his ex-wife, it will obtain judgment against her as well as possession of both properties, and the Judgment Debt will be satisfied in full; and
ii)if CBA is not successful against Ms Cheng, then it is possible that the loans the subject of the Judgment will either be found to be paid already; or be unsecured and he will have a legitimate grievance or claim against CBA for failing to ensure that the security was valid, thereby minimising his exposure;
e)given that there has been no finding as yet to the invalidity (or otherwise) of CBA's security, and given that at the time the Judgment was entered against him he was not aware of the possibility that the security could be found to be invalid, these are matters that could not have been raised in the proceedings in which Judgment was entered;
f)the failure by CBA to obtain judgment against Ms Cheng in over four and a half years also constitutes a legitimate grievance or claim against CBA, which could not have been raised; and
g)as of 1 July 2017, CBA lodged a caveat in relation to a Property Seizure and Sale Order over his property.
The submissions of each of the parties in relation to ground 7 are set out above.
Consideration
Irrespective of the fact that the legal title to the property may stand in one party’s sole name Trustees of the Property of Cummins (a bankrupt) v Cummins [2006] HCA 6; (2006) 227 CLR 278; (2006) 80 ALJR 589; (2006) 61 ATR 642; (2006) 224 ALR 280; (2006) 3 ABC(NS) 814; (2006) 35 Fam LR 343 at [14] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ stands for the principle that where there is a traditional matrimonial relationship, it is to be inferred that the parties to the marriage intended that they take a one-half interest in the property, irrespective of the amounts contributed by them. Further, where purchases or investments are made during the course of a marriage, they are generally considered joint contributions: Zyk v Zyk (1995) 128 FLR 28; (1995) 19 FamLR 797.
In circumstances where Mr Lam and Ms Cheng are in proceedings before the Family Court to determine property interests and rights, it is necessary to make reference to s.79 of the Family Law Act 1975 (Cth), concerning property settlement proceedings. The first step the Court must take in property settlement proceedings is to determine precisely what interest in the property each party own, that being so far as possible the precise legal and equitable interests that each party has in the property: Stanford v Stanford [2012] HCA 52; (2012) 247 CLR 108; (2012) 87 ALJR 74; (2012) 293 ALR 70; (2012) 47 Fam LR 481 at [37] per French CJ, Hayne, Kiefel and Bell JJ; In the Marriage of Pittman [2010] FamCAFC 30; (2010) 43 Fam LR 121; In the Marriage of Carter (1981) 7 Fam LR 41.
In Tait v Merlo [2007] FMCA 780, the respondent wife was alleged to owe money to solicitors who filed a Creditor’s Petition. Notwithstanding this, proceedings between the respondent and her husband were still live in Family Court when the Creditor’s Petition was filed and the Family Court had ordered that the costs were not payable until the conclusion of those proceedings. What is relevant in these proceedings is the following remarks at [17] per McInnis FM:
On the material before me I find that it is more likely than not that the distribution from the property pool in the Family Court proceedings is likely to result in an amount paid to the Respondent Debtor of an amount in excess of the claim by the creditor in the current Petition. The Court does not have sufficient information to make a proper assessment of the claimed indebtedness to the Supporting Creditor. Even if I am incorrect in that assessment then in my view having regard to the complexity of the issue before the Family Court and the significant and extensive nature of the property together with issues concerning valuation and the like, it would be more appropriate for that matter to be determined by the Family Court and for this Creditors Petition to then be determined by that Court.
The Court raised with the parties the Federal Court judgment in Hutchings. In Hutchings there was an appeal against the making of a sequestration order by the Federal Circuit Court and a refusal to stay proceedings under the sequestration order in circumstances where the Creditor’s Petition was founded on a debt owed to the Australian Securities and Investments Commission (“ASIC”) for interlocutory costs orders made in Supreme Court proceedings brought by ASIC. In that case there was an issue as to the arguability of an appeal in circumstances where there had been a very lengthy trial, there were very lengthy reasons for judgment, a significant number of grounds of appeal and contested credibility findings in relation to Mr Hutchings, seemingly none of which were sufficiently addressed by the primary Judge in this Court when determining to issue a sequestration order against Mr Hutchings. The circumstances in relation to Mr Lam are plainly distinguishable. He did not defend CBA’s action which resulted in the Judgment. Nor has he sought to have the Judgment set aside, and, in particular, he has not sought to set aside the Judgment in circumstances where he now asserts that he was never served with the writ of summons initiating the proceedings giving rise to the Judgment. There is insufficient material before the Court for it to conclude that there is an arguable case that Mr Lam was not served with the writ of summons. In circumstances where the Supreme Court Proceedings are still on foot, and Mr Lam has made no endeavour to set aside the default Judgment in circumstances where he says that the writ of summons was never served upon him, and there is evidence before this Court that it was served upon him, this Court is not in a position to conclude that there is other sufficient cause not to issue a Sequestration Order in those circumstances by reason of the alleged failure to serve the writ of summons.
Otherwise, and in any event, the Court considers that the resolution of the Supreme Court Proceedings upon which Mr Lam seemingly relies to contend that he will have assets capable of realisation, is itself, for reasons set out above, subject to further consideration in the Family Court Proceedings, and a resolution of those issues is simply so far away, and the delay is so prejudicial to CBA in circumstances where it has the Judgment, that his Court in the exercise of its discretion cannot conclude that grounds 3, 4 or 7 otherwise provide other sufficient cause not to issue a Sequestration Order against Mr Lam.
Ground 5
CBA did not feel it necessary to address the claims made in ground 5 as it submits that the Edgecumbe Street Property is not relevant to these proceedings given Mr Lam is, in its submission, not a registered proprietor, nor does he appear to have any interest in the property. Furthermore, CBA says there was no evidence before the Court to suggest that the City of South Perth intended to sell the Edgecumbe Street Property.
Mr Lam submitted:
a)the City of South Perth was currently considering a sale under the Local Government Act 1995 (WA) for unpaid council rates by his ex-wife for the property she is sole owner;
b)an email exchange from the City of South Perth to Mr Francis Lam dated 8 March 2016 states the following:
“I have been in touch with the Attorneys (Gadens Lawyers) acting for the Commonwealth Bank of Australia (Mortgagee) in respect of the sale of the property. I am currently negotiating with CBA to either pay the outstanding balances or to sell the property as a “mortgagee in possession sale." … If CBA do not come to the party and sell up their interest in the property, then the City will continue with the sale under the Local Government Act 1995.
c)should the local Government enact a forced sale, this would also bring about a further legitimate grievance claim or cross-demand against CBA.
It has been held that statutory charges over the debtor's property, including for unpaid council rates and charges, qualify as “holding a mortgage, charge or lien” such that a local council is a ‘secured creditor’ within the definition of s.5 of the Bankruptcy Act: Re Huntington; Ex parte Warringah Shire Council (1935) 8 ABC 161; 12 LGR (NSW) 108 at 164–165 per Long Innes CJ; Re St Ledger Cheyne; Ex parte Municipality of Willoughby (1958) 18 ABC 179; (1958) 9 LGRA 257; Re Burgess; Ex parte Snowy River Shire Council (1962) 19 ABC 139; (1962) 7 LGRA 255.
The fact that there is an email which, at the time of the hearing was almost two years old, not addressed to Mr Lam but to Mr Francis Lam, and which suggested that the City of South Perth might sell the property, is not evidence that there is a current intention on the part of the City of South Perth to sell the property. No evidence was called from any person at the City of South Perth as to the City of South Perth’s intention with respect to the property. The evidence thus falls well short of that required to make a finding that the City of South Perth intends to sell the property. This ground must fail on the basis that there is no, or no sufficient, evidence that it remains, or ever was, in fact, the intention of the City of South Perth, to sell the Edgecumbe Street Property.
Ground 6
Mr Lam argues grounds 3-5 all constitute a legitimate grievance or cross-demand against CBA such as to warrant a “sufficient cause” not to grant the Sequestration Order. CBA contends:
a)while it does not concede that Mr Lam has any claim against it (and there is no evidence filed by Mr Lam which would support any claim against CBA), the existence of an arguable claim by a debtor does not necessarily constitute “other sufficient cause” to dismiss a creditor’s petition: Rigg v Baker (2006) 155 FCR 531; Totev;
b)the determination of such a question will depend upon an assessment of the particular facts in each case, considered with the interests of the petitioning creditor, and there are no such facts before the Court for consideration; and
c)in LHF Wools Limited [1970] Ch 27, although the appeal related to the petition for the winding up of a company, the Court held that a debtor must show that the claim is a genuine and serious one which he or she has not reasonably been able to litigate, and again there is no evidence to this effect.
As grounds 3, 4 and 5 were not made out, ground 6, which relies upon those grounds, cannot be made out either.
Ground 8
Mr Lam took issue with the additional debt which has accrued as a result of interest charges on the Judgment Debt and the associated enforcement expenses of the legal proceedings. Mr Lam submitted:
a)the debt claimed under the Creditor’s Petition is for the amount of $1,426,912.91, inclusive of additional interest and enforcement cost of $163,467.24;
b)the additional interest and enforcement cost have not been agreed or assessed and CBA has not justified these; and
c)approximately $450,000 in additional interest and costs have been accrued in excess of the Judgement Debt, majority being enforcement of legal costs incurred in CBA's pursuit and failure to date in obtaining judgement against Mr Lam’s ex-wife.
CBA addresses this by simply stating for the purposes of the present application; even if the additional debt is not included Mr Lam still owes an amount in excess of $5000.
Ground 8 does not make out a sufficient cause to not issue a Sequestration Order against Mr Lam.
Ground 9
Ground 9 asserts that the Creditor’s Petition is an abuse of process.
Mr Lam submitted as follows:
a)it would be inequitable to penalise Mr Lam in the circumstances where he has not opposed Judgement or possession of the secured properties, and did so on the basis that CBA would take possession of the secured properties and sell them to pay the Judgment Debt;
b)the debt payment is only hindered by a dispute CBA has with Ms Marcy Cheng over which he has no control;
c)there are 4 parties to the debt and yet CBA is pursuing a Creditor's Petition against him only, despite also obtaining Judgement against others; and
d)the continual effort to proceed with the Creditor’s Petition against him despite the various on-going court proceedings and settlement offers presented is to pressure others into settling the matter.
CBA submitted as follows:
a)if the issue is as to whether the Judgment itself is problematic, the Court does not go behind a judgment as a matter of course, rather it can do so where there has been fraud, collusion or a miscarriage of justice: Wenkart v Abignano [1999] FCA 354 at 24;
b)while default judgments, such as the Judgment, may be viewed “with suspicion,” no fraud, collusion or miscarriage of justice or any reason for questioning whether there was in truth and reality a debt due to CBA has been demonstrated by the Mr Lam, as such no special circumstances are apparent on the evidence before the Court to warrant going behind the Judgment; and
c)there was no application to set the Judgment aside and no appeal in respect of the Judgment nor is there is no evidence before the Court to establish that there are substantial reasons for doubting whether there is really a debt due to CBA such as to warrant going behind the Judgment.
The categories of abuse are not closed, and certain categories are well-established, and it can be said that abuse of process usually falls into one of three categories: Rogers v R (1994) 181 CLR 251 at 286 per McHugh J; followed in HWY Rent Pty Ltd v HWY Rentals (in liq) (No.2) [2014] FCA 449 at [74] per Perry J.
a)the Court’s procedures are invoked for an illegitimate purpose;
b)the use of the Court’s procedures is unjustifiably oppressive to one of the parties; or
c)the use of the Court’s procedures would bring the administration of justice into disrepute.
It is plain here that the Court’s procedures are not being invoked for an illegitimate purpose as CBA are entitled to seek the issuance of a Sequestration Order in circumstances where it has the Judgment for the amount of the Judgment Debt. Nor does the use of the Court’s procedures in those circumstances bring the administration of justice into disrepute. Not only can CBA invoke the Court’s processes seeking the issue of a Sequestration Order, but Mr Lam is entitled to dispute whether or not a Sequestration Order ought to issue, and to have the Court resolve that controversy. In that respect the administration of justice in this case is being dealt with in an entirely orthodox manner. As to whether the use of the Court’s procedures is unjustifiably oppressive to Mr Lam the Court’s view is that it is not so. As indicated above he had the opportunity to put his case, and the Court has to resolve that controversy. To suggest that the procedures are being used oppressively in circumstances where Mr Lam did not seek to set aside the Judgment, and there is no other appeal against the Judgment, is not oppressive. Moreover, Mr Lam has been granted a number of adjournments in these proceedings by Registrars to enable him to resolve both the Supreme Court Proceedings and the Family Court Proceedings, but that has not been possible. In circumstances where the Creditor’s Petition is now about to expire, and the formal requirements for a Sequestration Order have been made out, Mr Lam is not able to pay the Judgment Debt, and otherwise the Court has concluded that there is no other sufficient cause not to issue a Sequestration Order, all of the circumstances of this matter do not warrant a finding that the Court’s procedures are being used in a manner which is unjustifiably oppressive to Mr Lam. In this case there is no evidence that CBA has used this Court’s bankruptcy processes for a purpose which is not legitimate, or that its predominant purpose is a use of the legal process for a purpose other than that for which it has been designed: Rozenbes & Ors v Kronhill & Anor (1956) 95 CLR 407; (1956) 18 ABC 57; (1956) 30 ALJ 470; Williams v Spautz (1992) 174 CLR 509; (1992) 66 ALJR 585; (1992) 34 AILR 373 (1992) 61 A Crim R 431; CLR at 529 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. Generally, where a creditor has an interest in the debtor being made bankrupt to stifle litigation, that has been held to not, of itself, be enough for refusing the making of a Sequestration Order: Re Coyne; Ex parte Binningup (South) Pty Ltd (unreported, Federal Court of Australia, French J, 10 November 1991), but in this case there is no evidence that the intent of CBA is to stifle other litigation. Indeed, it appears that both the Supreme Court Proceedings and the Family Court Proceedings will proceed in any event. In the above circumstances the Court does not consider that the issuance of the Creditor’s Petition is an abuse of process, and ground 9 is not made out.
Conclusion and orders
The Court has concluded that:
a)the formal requirements for the issuance of a Sequestration Order have been made out;
b)there is no other sufficient cause not to issue a Sequestration Order;
c)a Sequestration Order ought therefore issue against the estate of Mr Lam; and
d)Mr Lam’s estate ought to pay CBA’s costs, which if not agreed, are to be assessed by a Registrar of this Court under Pt.40 of the Federal Court Rules 2011 (Cth).
I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of Judge Lucev
Associate:
Date: 15 June 2018
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