Commonwealth Bank of Australia v Psevdos
[2016] FCCA 1480
•6 June 2016 (ex tempore)
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COMMONWEALTH BANK OF AUSTRALIA v PSEVDOS | [2016] FCCA 1480 |
| Catchwords: BANKRUPTCY – Creditors petition – whether debtor solvent – whether “other sufficient cause” not to make sequestration order. |
| Legislation: Bankruptcy Act 1966 (Cth) Supreme Court Civil Rules 2006 (SA), r. 296 |
| Cases cited: McIntosh v Shashoua (1931) 46 CLR 494 Wren v Mahony (1972) 126 CLR 212 |
| Applicant: | COMMONWEALTH BANK OF AUSTRALIA |
| Respondent: | SPIROS PSEVDOS |
| File Number: | ADG 465 of 2015 |
| Judgment of: | Judge Heffernan |
| Hearing date: | 6 June 2016 |
| Date of Last Submission: | 6 June 2016 |
| Delivered at: | Adelaide |
| Delivered on: | 6 June 2016 (ex tempore) |
| Reasons settled on: | 17 June 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr B Roberts SC |
| Solicitors for the Applicant: | Fisher Jeffries |
| The Respondent: | In person |
| Counsel for the Supporting Creditors: | Mr G A Stevens |
| Solicitor for the Supporting Creditors: | MST Lawyers |
UPON NOTING THAT Mr Allan Geoffrey Scott and Mr Maris Andris Rudaks have consented to act as trustees in this matter
ORDERS
A sequestration order be made against the estate of Spiros Psevdos.
The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
The Court notes that the date of the act of bankruptcy is 14 December 2015.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 465 of 2015
| COMMONWEALTH BANK OF AUSTRALIA |
Applicant
And
| SPIROS PSEVDOS |
Respondent
REASONS FOR JUDGMENT
(Reasons settled from transcript)
There are two matters before me. The first is an Application in a Case filed by the respondent to the creditor’s petition, Mr Psevdos. The second is the Creditor’s Petition. The Application in a Case, and the Affidavit of Spiros Psevdos, dated 6 June 2016, were received by the Court today. They were not filed in the Registry. I gave leave for Mr Psevdos to file that application and supporting affidavit from the bar table.
Application in a Case
Mr Psevdos seeks the following orders in that application: firstly, that the applicant creditor’s petition be dismissed; secondly, the applicant be directed to transfer the amount of $121,163, held on trust with Fisher Jeffries Solicitors, to the Supreme Court of South Australia suitors’ fund with identifying action under SCC1V 14-683; thirdly, that the costs in the case/application be reserved pending determination on appeal.
Mr Roberts SC, counsel for the creditor, has indicated that he has no objection to the Court proceeding to hear the Application in a Case today, even though it has only just been filed. Mr Stevens, for the supporting creditor, has very limited instructions in relation to this matter, but has raised no objection to the Court proceeding on the Application in a Case today at the same time as the further consideration of the Creditor’s Petition.
I will summarise briefly what has happened in this matter since the last occasion. Argument was heard by me on 30 May 2016 in relation to the Creditor’s Petition, and I indicated that I would deliver my judgment at 4.00pm on that day. During the course of that afternoon, after 3.00pm, the respondent, Mr Psevdos, communicated with the applicant’s solicitors, making a proposal which he said, in effect, was to pay the outstanding sum and by inference, it seems the source of those funds was going to be from his mother.
I adjourned the matter to this morning, so that the attempt at negotiation on Mr Psevdos’ part could be considered by the applicant, namely, the creditor, because at that time, Mr Roberts SC was not in a position to respond to the proposal because he did not have any instructions. The affidavit material that has been filed before me establishes that there was communication between Mr Psevdos and the solicitor for the creditor, and that the creditor has indicated that the offer was to be rejected and that no other agreement could be reached.
At approximately 3.00pm on 2 June 2016, the applicant says that Mr Psevdos provided a proof of payment of the amount alleged in the Bankruptcy Notice. That amount was banked directly into the Fisher Jeffries trust account. It appears to have been paid by Mr John Dean on Mr Psevdos’ behalf, and the Affidavits establish that this was in return for an unspecified security.
The creditor maintains that the payment of this amount into its trust account is not accepted by it and that it regards the debt as still outstanding. Mr Psevdos submits that this rejection by the creditor is indicative of a collateral purpose on its part, rather than any intention to avail itself legitimately of the bankruptcy regime. As far as Mr Psevdos is concerned, he has paid the judgment debt and the creditor’s action in refusing the tender of the payment is bloody minded and consistent with its dealings with him over a number of years which, indeed, he says are tainted by fraud and dishonest dealings on the part of the creditor.
The creditor’s submission, with respect to the payment of those moneys, is that the act of bankruptcy has already been committed and it is not obliged to accept the deposit in payment of the debt that is owing to it. It refers the Court to the authority of McIntosh v Shashoua[1], which it says establishes that a petitioning creditor is entitled to refuse such a payment in circumstances such as this and proceed with the petition.
[1] McIntosh v Shashoua (1931) 46 CLR 494.
It also makes the observation that the fact that a petitioning creditor may choose to do so is not, of itself, indicative of a collateral purpose on the part of a petitioning creditor. But rather, that it is simply strengthening of the conclusion that the petitioner does desire to obtain a sequestration order, or in other words, avail itself of the regime as set out in the Bankruptcy Act 1966 (Cth), (‘the Act’).
The creditor says the fact of the payment does not, because it has been declined by the creditor, demonstrate that the debt has been paid and, in fact, the debt is in fact, still owing.
Creditor’s Petition
With respect to the Creditor’s Petition itself, this is a Creditor’s Petition filed by the Commonwealth Bank of Australia ACN 123 123 124 seeking a sequestration order against the estate of the respondent, Mr Spiros Psevdos. The amount of the debt identified in the Creditor’s Petition is $121,121.64, being an amount of $120,068.89 under an allocatur obtained by the applicant in the Supreme Court of South Australia, Action Number 683/2014, on 23 September 2015, and post-judgment interest on the allocatur amount to 2 November 2015, in the amount of $1,052.66.
The applicant creditor relies on the following materials in support of this application, that is: the Affidavit of Service of the Bankruptcy Notice of Brenton Michael Kitson sworn on 17 December 2015; the Affidavit of Service of the Bankruptcy Notice of Kasia Gabrielle Dziadosz-Findlay sworn on 17 December 2015; the Affidavit of Search of Kasia Gabrielle Dziadosz-Findlay sworn on 17 December 2015; the Affidavit of Service for the Creditor’s Petition of Brenton Michael Kitson sworn on 22 December 2015; the Affidavit of Wendy Anne Jones affirmed on 29 February 2016; the further Affidavit of Kasia Gabrielle Dziadosz-Findlay sworn on 26 May 2016; the Affidavit of Debt sworn by Robert Charles Ralston on 27 May 2016; the Affidavit of Final Search of Wendy Anne Jones affirmed on 27 May 2016; the Affidavit of Robert Charles Ralston dated 3 June 2016; the Affidavit of Kasia Gabrielle Dziadosz-Findlay dated 3 June 2016; and a further Affidavit of Kasia Gabrielle Dziadosz-Findlay dated 3 June 2016.
The respondent, for his part, relies on a number of Affidavits sworn by himself dated 27 November 2015; 9 December 2015; 14 December 2015; 16 March 2016; 24 March 2016; 26 May 2016; 27 May 2016; and his Notice Stating Grounds of Opposition in this matter. He says that he also relies on Kasia Gabrielle Dziadosz-Findlay’s Affidavit from 11 December 2015; the Affidavit of Wendy Jones affirmed on 29 February 2016, and his various Outlines of Submissions in relation to this matter. I note also that he sought to rely on an Affidavit sworn on 3 May 2016 and, of course, there is the further Affidavit which he provided to the Court from the bar table of today’s date, 6 June 2016.
The respondent filed the Notice of Grounds of Opposition to the Creditor’s Petition, and the Notice of Objection raises a number of contentions. I will summarise them briefly rather than quoting verbatim. He asserts and maintains that he is solvent. Secondly, that he is not liable for the debt. Thirdly, that he has appealed the decision made by me to refuse to set aside the Bankruptcy Notice to the Federal Court, and that appeal is yet to be determined. Fourthly, that I should look behind the judgment because he alleges fraud and collusion. Fifthly, that he asserts his appeal against the judgment of Parker J is capable of being revived or is still pending.
With respect to the question of solvency, the applicant relies inter alia on paragraph 7 of his Affidavit dated 30 May 2016, and Annexure SP4 to demonstrate this. He also relies on the fact that in the past week, the funds earlier referred to, have been paid into the trust account of Fisher Jeffries. I have considered the materials relied on by the applicant and the affidavit material relied on by the respondent.
I am satisfied that the creditor has proven those matters of which proof is required by s.43(1) of the Act, namely, that the Court has jurisdiction to make a sequestration order against the estate of the debtor, and s.52(1) of the Act, namely, the matter stated in the petition, and the fact of the act of bankruptcy, the service of the application, and the fact that the debt on which the Creditor’s Petition relies is still due and owing. That having been said, there is a discretion under s.52(2) of the Act and I turn to the question of that discretion now.
Discretion under s.52(2)
I will deal with the question of the potential appeal first. Pursuant to s.52(2)(b) of the Act, there is a discretion not to make an order if I am satisfied by the debtor that there is sufficient cause not to do so. The applicant has referred me to a number of authorities as to what may or may not amount to sufficient cause. And particularly, in the context of this matter, it points to authorities which suggest that the existence of an appeal which is yet to be determined does not, of itself, prevent the making of a sequestration order, but it is a relevant consideration.
As I have said, one such sufficient cause may be the existence of an appeal on the judgment that forms the basis of the debt. The creditor says that Mr Psevdos has not established a sufficient cause for the purpose of 52(2)(b). Whilst it notes that generally a Court would not proceed to sequestrate the estate of a debtor where an appeal is pending against a judgment relied on in the Bankruptcy Notice, that appeal would have to be based on genuinely arguable grounds. It submits that the Supreme Court appeal is no longer pending. It has lapsed by virtue of the operation of the Supreme Court Civil Rules 2006 (SA) (“the Rules”) and stands dismissed, and there is no application by Mr Psevdos to have it re-instated. It further submits that Mr Psevdos has been on notice of that issue for a long period of time.
Mr Psevdos has today submitted that he is able to attend at the Supreme Court to pay the security for costs that was previously ordered that he pay, and that he is able to make an application to re-instate the appeal which presently stands dismissed by virtue of the Rules. However, the interim allocatur itself was not the subject to an appeal. It was subject to a consent order and it is that judgment which forms the basis of the debt upon which the creditor is proceeding in the Creditor’s Petition.
The creditor submits that the appeal from my decision to refuse to set aside the Bankruptcy Notice is devoid of merit, and possibly an abuse of the Court’s process, and that I should not regard the fact of that appeal as a sufficient reason not to make any sequestration order if I was satisfied that there was not otherwise a sufficient cause not to do so. The Supreme Court appeal has not been re-enlivened and Mr Psevdos’ submission that he can begin that process today after this matter has been dealt with, really does not take the matter any further.
There is no application presently before the Supreme Court to re-instate that appeal, and as I have already indicated, the interim allocatur was not appealed. The appeal to the Federal Court against my decision dismissing the application to set aside the Bankruptcy Notice, is a matter that I have taken into account as a relevant consideration. As I have said, the fact of an appeal itself is not a sufficient basis alone to postpone the hearing of the Creditor’s Petition; it is merely a relevant consideration.
I have been provided by Mr Psevdos with a copy of the Notice of Appeal. It is always a matter of some embarrassment when a Court is called upon to make some sort of assessment about the merits of an appeal from its own decision when an appeal has been made to a higher Court. However, I have considered that Notice of Appeal provided to me by Mr Psevdos. I do not regard it as having sufficient merit to warrant a postponement of these proceedings.
I do not regard it as having a real chance of success on appeal. I am not satisfied on the history that has been outlined in much of the affidavit material, that in any event, I could be assured that the appeal will be prosecuted by the respondent expeditiously, and I note the circumstances in which the appeal against the decision of Parker J lapsed by virtue of the Rules.
As to the submission that I should look behind the judgment, I am not satisfied that it is necessary or appropriate in this matter that I should do so. I note the decision of Wren v Mahony[2] where it was held that where a judgment has been determined as a result of proceedings in open Court, it requires exceptional circumstances to look behind it. I am not satisfied that such circumstances exist.
[2] Wren v Mahony (1972) 126 CLR 212.
With respect to the question of solvency, the applicant asserts that he is solvent and as I have said, relies on paragraph 7 of his Affidavit dated 30 June 2016, and Annexure SP4, to demonstrate this and the matters contained in his Affidavit filed today, being 6 June. I have considered those materials closely. I am not satisfied that Mr Psevdos has demonstrated his solvency.
I note that the order in the Application for a Case, which seeks that the moneys currently in the Fisher Jeffries trust account be paid into Court, is contested by the creditor who says that that application should be dismissed in its entirety. In short, Mr Roberts SC, on behalf of the creditor, says that I could not be satisfied on the material presently before the Court and the Affidavits, that this is truly a third party payment. Mr Psevdos asserts vehemently from the bar table that it is and that the security referred to is not a security that he has any direct interest in and that the payment of the moneys does not affect his financial estate.
I take the view that there is sufficient doubt about the providence of those moneys, at least in my mind, as to whether or not this is a genuine third party payment. I do not regard it as appropriate to make any order with respect to the disposition of the funds presently in the Fisher Jeffries trust account.
Accordingly, I make the following orders.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Heffernan
Date: 17 June 2016
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