Complete Credit Acquisitions Pty Ltd v Sheriff

[2019] FCCA 3763

FEDERAL CIRCUIT COURT OF AUSTRALIA

COMPLETE CREDIT ACQUISITIONS PTY LTD v SHERIFF [2019] FCCA 3763

Catchwords:
BANKRUPTCY – Application In a Case to appoint an interim trustee to take control of the respondent’s property pursuant to s.50 of the Bankruptcy Act 1966 (Cth) – s.50(1A) of the of the Bankruptcy Act 1966 (Cth) factors considered – application allowed.

Legislation:

Bankruptcy Act 1966 (Cth), ss.50

Federal Circuit Court Rules 2001 (Cth), rr.13.03C, 16.05

Applicant: COMPLETE CREDIT ACQUISITIONS PTY LTD

Respondent: FATUMATA SHERIFF

File Number: SYG 3042 of 2019

Judgment of: Judge Nicholls

Hearing date: 4 December 2019

Date of Last Submission: 4 December 2019

Delivered at: Sydney

Delivered on: 4 December 2019

REPRESENTATION

Representative for the Applicant: Mr R Roser

Solicitors for the Applicant: Roser Lawyers

ORDERS

1. Daniel Peter Juratowitch (of Cor Cordis Chartered Accountants) is appointed as trustee pursuant to s.50 of the Bankruptcy Act 1966 (Cth) to take control of all “property” as defined in s.5 of the Bankruptcy Act 1966 (Cth) of the respondent, including but not limited to the property as described in Volume 04514 Folio 723 being the land known as 171-173 Grano Street Ararat Vic 3377 (Property). The trustee has power to secure and realise any divisible property as defined by the Bankruptcy Act 1966 (Cth) for the benefit of the respondent’s creditors.

2. The property remain in the control of Daniel Peter Juratowitch until determination of the creditor’s petition.

3. Daniel Peter Juratowitch is at liberty to lodge a caveat over the Property as a person who is interested in the Property by operation of s.50 of the Bankruptcy Act 1966 (Cth).

4. The applicant’s costs of this application be paid by the respondent.

5. The trustee’s costs of and incidental to his appointment be paid by the respondent from the surplus funds realised in relation to the sale of the Property and any funds recovered during his appointment as trustee including cash, and all the realisations of property of the respondent without further orders required.

THE COURT NOTES:

The Court notes the existence of Rule 16.05 of the Federal Circuit Court Rules 2001 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 3042 of 2019

COMPLETE CREDIT ACQUISITIONS PTY LTD

Applicant

And

FATUMATA SHERIFF

Respondent

REASONS FOR JUDGMENT

Extempore; Revised from Transcript

1. This is an Application in a Case (“AIC”) made pursuant to s.50 of the Bankruptcy Act 1966 (Cth) filed by Complete Credit Acquisitions Pty Ltd (“CCA”) on 22 November 2019, and amended on 3 December 2019, seeking, amongst other things, that Daniel Peter Juratowitch be appointed as interim trustee of the property held by Fatumata Sheriff (“Ms Sheriff”).

2. The initial AIC sought an order pursuant to s.50 of the Act in relation to the real property described as volume 11592 folio 103, 33 Erindale Street, Cranbourne West VIC 3977 (“33 Erindale Street”). However, an online property search conducted by an employee of CCA on 22 November 2019, revealed that this property had been sold. Therefore, the amended AIC is concerned with the real property described in volume 04514 folio 723, 171-173 Grano Street Ararat Victoria 3377 (“the real property”), and other property (“the property”).

3. The matter came before me as Duty Judge on 4 December 2019. Ms Sheriff did not attend at the hearing.

4. The evidence before the Court is as follows:

   (a)The affidavit of Jill Margaret Johns, process server of 2 December 2019;

   (b)Two affidavits of Raymond John Roser, solicitor both made on 3 December 2019 (referred to as “first affidavit” and “second affidavit” respectively);

   (c)The affidavit of James Steven Williamson, senior legal support officer of 22 November 2019;

   (d)A bundle relevant documents, including email correspondence between the respondent, her husband and the applicant between dated 18 March 2019, tendered by the applicant (“AE1”);

   (e)Title search of volume 1023870 folio 387: 171-173 Grano Street Ararat VIC 3377 (“AE2”); and

   (f)Oral evidence given by James Steven Williamson, senior legal support officer.

Background

1. Ms Sheriff guaranteed a loan in a motor vehicle loan contract, and mortgage agreement, between the Kamaras Group Pty Ltd and Nissian Financial Services Australia (“Nissan”). It would appear on the evidence Ms Sheriff was called upon to pay the debt which she had guaranteed, and failed to repay the money owing. On or around 8 November 2019 both the contract and the debt were assigned to CCA. On or around 3 July 2019, CCA obtained a default judgment against Ms Sheriff for $59,120.72. I note that following judgment, Ms Sheriff subsequently made three payments totalling $1,800.00.

2. On or around 25 October 2019 a bankruptcy notice was issued and subsequently served on Ms Sheriff. She was required to pay the money owing, or make arrangements with the creditor’s to do so, within twenty-one days of being served with the bankruptcy notice. She failed to comply with the bankruptcy notice by 18 November 2019 and as such is said to have committed an act of bankruptcy. I note for completeness, that although Ms Sheriff has made some payments towards the debt, no payments have been made since the bankruptcy notice was issued.

3. A Creditor’s Petition was filed by CCA in this Court on 20 November 2019. That Creditor’s Petition is to be heard on 4 February 2020.

4. Mr Williamson, is a senior legal support officer, employed by the CCA. On the evidence of Mr Williamson, Ms Sheriff gave authority for her husband to speak on her behalf in relation to the debt. Mr Williamson, had numerous conversations with Ms Sheriff’s husband.

5. There is nothing in the evidence before the Court to indicate that for current purposes Mr Williamson’s evidence, both by way of affidavit and given orally before the Court, should not be accepted.

6. During one such conversation on or around June 2019 Ms Sheriff’s husband indicated that he and his wife intended to “refinance” 33 Erindale Street, of which Ms Sheriff was the sole registered proprietor, and that the funds obtained from refinancing would be used to settle the debt owed to CCA.

7. At [24] of Mr Williamson’s affidavit he sets out how he completed an online property search on 22 November 2019 and “discovered” that 33 Erindale Street had been listed for private sale, and subsequently sold (see annexure JW6 of his affidavit).

8. It appears, that while those discussions were taking place, between Mr Williamson and Ms Sheriff’s husband (about the “refinancing” of this property), Ms Sheriff and her husband had taken steps to put on the market this real property, (being 33 Erindale Street), and entered into a contract of sale, and the property was subsequently sold, without disclosing this to Mr Williamson. Far from refinancing, Ms Sheriff pursued a different course to that told to Mr Williamson.

9. This situation was only discovered when Mr Williamson completed an online property search, and found that the property had been sold while he, and CCA were under the belief that that property was part of the refinancing that Ms Sheriff and her husband had said they were seeking to effect. 

10. It was on discovering that 33 Erindale Street had been sold that CCA became concerned, as the representations made by Ms Sheriff’s husband (who had her relevant authority), concerning the property was inconsistent with the property being sold.

11. Given the conduct of Ms Sheriff, through her husband, there was a real possibility that when the substantive application was to come before the Court, and if a sequestration was to be made, there would not be property available for distribution to the creditors. 

The Issue

1. CCA filed the AIC on 22 November 2019, which was amended on 3 December 2019, to preserve the property for the creditors.

2. Essentially, CCA, a creditor (who, on the evidence, is not the only creditor), is seeking to preserve the property of Ms Sheriff so that when the substantive application comes before the Court in February next year, there will be property available, in the event that a sequestration order is made, for distribution to the creditors. 

Before the Court

1. CCA was represented by a solicitor. When the matter was called there was no appearance by or on behalf of Ms Sheriff. I was satisfied on the second affidavit  of Mr Roser that CCA wrote to Ms Sheriff, stating “that the matter is listed for hearing on 4 December at 9:30am at Court 8.2, level 8, 80 William Street, Sydney NSW 2010”. I was satisfied on the evidence before me that Ms Sheriff had reasonable notice of the Court event, and proceeded to hear the matter pursuant to r.13.03C(1)(e) of the Federal Circuit Court Rules 2001 (Cth) (“the Rules”).

2. As I noted during the hearing the existence of r.16.05(2)(a) of the Rules provides an avenue by which Ms Sheriff may seek to set aside the orders made today in her absence, in the event that she may have had an answer to the matters put against her today.

Section 50 Application

1. CCA relies on the conduct of Ms Sheriff to submit that the orders should be made, bearing in mind the circumstances to which s.50 of the Act is directed. That is, the preservation and protection of property in the circumstances that I have already outlined.

2. Section 50(1A) of the Bankruptcy Act 1966 (Cth) is in the following terms:

   “(1A)  The Court may give a direction or make an order only if:

   (a)  a creditor has applied for the Court to make a direction; and

   (b) the Court is satisfied that it is in the interests of the creditors to do so; and

   (c) the debtor has not complied with the bankruptcy notice.”

3. To grant the relief requested by CCA, the Court must be satisfied that the matters set out at s.50(1A)(a)-(c) are made out.

Has the creditor applied for the Court to make a direction?

1. As stated above, CCA filed a creditor’s petition with this Court on 20 November 2019. On 22 November 2019, CCA filed, a subsequently amended AIC requesting that an interim trustee be appointed to preserve Ms Sheriff’s property in the interests of the creditors. Section 50(1A)(a) is therefore satisfied.

Has the debtor complied with the bankruptcy notice?

1. On the evidence of Mr Williamson, a bankruptcy notice numbered BN 247077 was issued on 25 October 2019. On its face, the bankruptcy notice appears to be valid. CCA had twenty-one days from the date of service of the bankruptcy notice, to comply with the bankruptcy notice (annexure JW3 of Mr Williamson’s affidavit). That is, to repay the debt in full in the amount of $59,152.44.

2. Annexure JMJ7 of Ms John’s affidavit, indicates that the bankruptcy notice was served on Ms Sheriff on 28 October 2019 at 33 Erindale Street, Cranbourne West, 3977. As stated above, Ms Sheriff had twenty-one days from 28 October 2019 to comply with the bankruptcy notice. On the evidence of Mr Williamson, Ms Sheriff did not pay any money towards the debt between 28 October 2019 and 18 November 2019 ([19] of Mr Williamson’s affidavit). 

3. On the evidence before me, I am satisfied that a bankruptcy notice was properly issued, and that Ms Sheriff failed to comply with the bankruptcy notice by the requisite date.

4. Further, I note that a creditor’s petition has been filed by CCA with this Court, and there has been no response filed by Ms Sheriff in this matter.

Is the requested relief in the interests of the creditors?

1. On the evidence of Mr Williamson, Ms Sheriff gave authority for her husband to speak on her behalf in relation to the debt. I am satisfied on that evidence, and taking into account specifically, AE1 and that part of that exhibit to which the Court was taken through the evidence of Mr Williamson, that Ms Sheriff in the proceedings gave authority to her husband to speak on her behalf with CCA in relation to her account in the CCA, which includes the debt owed.

2. The concern that the property will not be available at the relevant time arises from conduct to date, by Ms Sheriff and through her husband, who was authorised to speak for her. In particular, that while discussions were taking place with Mr Williamson, Ms Sheriff’s husband on behalf of Ms Sheriff, made certain representations about requiring further time to make arrangements, including refinancing of her (and his) affairs, which appear on the evidence to have some degree of being intermingled. On Mr Williamson’s evidence he was given to understand that steps were being taken for Ms Sheriff to be in a position to make attempts to repay the debt. 

3. I accept on the evidence that it was on discovering that 33 Erindale Street had been sold, through conducting an online property search, that CCA became concerned, that the property of Ms Sheriff would be diminished so as to frustrate the interests of the creditors. Given the conduct of Ms Sheriff including that of her husband, who had her authority to act on her behalf, there was a real possibility that when the substantive application was to come before the Court, and if a sequestration was to be made, there would not be property available for distribution to the creditors.

4. I am satisfied on the evidence, and I agree with submissions made before the Court, that that conduct is sufficient to justify the making of orders to preserve and protect the debtor’s property, that is, Ms Sheriff’s property, so that real property and/or funds or other assets will be available for distribution to creditors at the appropriate time, if the Court were to make a sequestration order.

Conclusion

1. As set out above, I am satisfied that the requisite criteria set out at s.50 of the Act, have been made out, and that orders should be made to preserve that situation. I will make the necessary orders.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge Nicholls

Associate: 

Date: 20 December 2019