Community Association Deposited Plan No.270263 v Vu
[2009] FMCA 150
•24 February 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| COMMUNITY ASSOCIATION DEPOSITED PLAN No.270263 v VU | [2009] FMCA 150 |
| BANKRUPTCY – Costs – creditor’s petition – where debtor provided proof of solvency some time after petition issued – where petition was dismissed – whether petition necessary in the first place – whether costs should be awarded to creditor. |
Federal Magistrates Court (Bankruptcy) Rules 2006
| Monsour Pty Ltd v Amos [2007] FMCA 740 World Best Holdings Ltd v Sarker [2006] FMCA 1876 |
| Applicant: | COMMUNITY ASSOCIATION DEPOSITED PLAN NO:270263 |
| Respondent: | TRANG DOAN VU |
| File Number: | SYG 2422 of 2008 |
| Judgment of: | Raphael FM |
| Hearing date: | 24 February 2009 |
| Date of Last Submission: | 24 February 2009 |
| Delivered at: | Sydney |
| Delivered on: | 24 February 2009 |
REPRESENTATION
| Solicitors for the Applicant: | Grace Lawyers |
| Solicitors for the Respondent: | Hall Partners |
ORDERS
Petition dismissed.
Respondent Debtor to pay Applicant Creditor’s costs of Petition up to and including 16 December 2008.
Respondent Debtor to pay costs of Applicant Creditor of 10 February 2009 and of hearing today, all costs to be taxed if not agreed according to Federal Magistrates Court (Bankruptcy) Rules 2006.
THE COURT NOTES:
That the costs of the costs application include the costs of preparation in addition to the costs of appearance.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2422 of 2008
| COMMUNITY ASSOCIATION DEPOSITED PLAN NO:270263 |
Applicant
And
| TRANG DOAN VU |
Respondent
REASONS FOR JUDGMENT
In the hearing before me today, it has been agreed between the parties that the bankruptcy petition shall be dismissed. What is in issue is the costs of the bankruptcy petition and the costs of the argument about costs because it is agreed that the bankruptcy petition would have been dismissed some short time ago had Registrar Hedge consented to do that rather than refer both matters to this Court.
The bankruptcy proceedings between the parties have a lengthy history brought about because the applicant, for medical reasons which have been explained, resisted service - not just of bankruptcy proceedings, but of the proceedings to enforce the judgment upon which the bankruptcy notice and now the petition were based. Her resistance was effective and lengthy, and it was necessary for the creditor to apply for orders for substituted service in relation to both the bankruptcy notice and the petition.
One of the matters that I must consider in this case was the necessity to issue bankruptcy proceedings in the first place, because the amount of the debt is small. I am satisfied from the evidence that has been given to me in the affidavit of Mr Ecob that the creditor tried strenuously to collect the debt without recourse to bankruptcy proceedings, and that these proceedings were only taken as a last resort.
The creditor did not respond to the bankruptcy notice and she did not initially respond to the bankruptcy petition. Eventually, she secured the services of Mr Hall who has appeared before me today. He first contacted the respondent on or about 10 November 2008 and by about the 20th of that month made it clear that his client's ground of opposition to the petition was her solvency. On her behalf, he filed an affidavit of 1 December 2008 which provided some information concerning her financial affairs. Unfortunately, the way in which the affidavit was drawn made most of that information mere assertion. The only attempt at proof was the exhibiting of a document that purported to indicate the value of the debtor's share portfolio. But that document was undated.
By 16 December 2008, matters had improved and an affidavit was filed in Court on that day which I have considered and which I believe would satisfy a creditor that his debtor of $3,000.00 odd was solvent. At the same time, Mr Hall arranged for the amount in dispute to be paid into his trust account. It would appear that this is not the only issue between the debtor and the creditor. There is apparently an outstanding “running account” which is strongly disputed. It seems that Mr Hall and his client were anxious for this Court to refer the whole matter to mediation, and whilst I have indicated that this was a course of action that I deemed worthwhile, I noted that there was no power to do this because the mediation only concerned the running account which was not the subject of any proceedings in the Court. The debtor has acknowledged that the amount paid into Mr Hall's trust account, and which was the subject of the bankruptcy notice, was well and truly owed.
On 16 December 2008, the day the affidavit was filed, the matter came before the Court. The creditor, not unreasonably, requested an adjournment so that it could consider the contents of the affidavit. This was granted. The creditor's solicitors then went on Christmas holidays and returned some time at the end of January. They had, in the meanwhile, issued a notice to produce requiring almost every conceivable financial document of the debtor but that was not responded to. On 10 February 2009, the creditor's solicitors advised Mr Hall that their client was prepared to have the petition dismissed provided the costs were paid. The matter then came before the Registrar again and both the issue of the dismissal of the petition and the costs were referred to me today.
I have heard lengthy argument from both legal practitioners and am grateful to them both for their assistance. The creditor's case is that, where bankruptcy petitions are dismissed because the debt has effectively been paid, the costs of the petition are usually awarded to the creditor: Monsour Pty Ltd v Amos [2007] FMCA 740 and the cases therein cited; World Best Holdings Ltd v Sarker [2006] FMCA 1876 and the cases therein cited. This I accept is the usual situation. Mr Hall, for the debtor, argues that those cases are not analogous. What he says is that this petition was wrongfully issued because his client was always solvent and all she had to do was to establish it and she would be entitled to the dismissal of the petition and payment of her costs based upon the usual maxim that costs follow the event.
I have some sympathy with Mr Hall's argument, but I do not think that, in the context of this case, it is correct. It is based upon an assumption that the petition should never have been issued. But petitions are themselves based on an act of bankruptcy. In this case the act of bankruptcy was the failure to comply with the bankruptcy notice. The existence of an act of bankruptcy has never been denied and therefore the justification for issuing the petition has never been denied. I cannot see that the creditor was wrong to have issued the petition in the first place which is what I believe is required to establish Mr Hall's argument. Having issued the petition the debtor could have put on, at a very early stage, a notice of opposition claiming solvency, and established that. Mr Hall elides from an argument that it is the respondent debtor’s responsibility to establish the facts alleged, namely, her solvency, but that obligation cannot be ignored.
In this particular case, an allegation of solvency was made but not established until 16 December 2008 and to my mind the debtor should be responsible for the costs involved in the proceedings up until that time. Because of the intervention of the Christmas holidays there was some further delay, but Mr Radman for the creditor accepts that if an order for costs is to be made it should be limited to the period up to 16 December 2008. On the other hand, he asks for what I call the costs of the costs argument which he says is something that was first brought to the Court on 10 February 2009 and then adjourned until today. In regard to that argument, I am satisfied that Mr Radman has established his point.
Mr Hall's view was that no costs should be paid and that is a view I believe he maintains. He has therefore lost the costs application and the costs of that application should follow the event. The orders I will make in this case are as follows. That the Petition be dismissed. The Respondent Debtor pay the Applicant Creditor’s costs of Petition up to and including 16 December 2008. The Respondent Debtor pay the costs of the Applicant Creditor of 10 February 2009 and of hearing today. All costs are to be taxed if not agreed according to Federal Magistrates Court (Bankruptcy) Rules 2006. The costs of the costs application shall include the costs of preparation in addition to the costs of appearance.
I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 26 February 2009
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