CTI Logistics v Ogbonna

Case [2022] FedCFamC2G 781

Federal Circuit and Family Court of Australia

(DIVISION 2)

CTI Logistics v Ogbonna [2022] FedCFamC2G 781

File number(s): PEG 96 of 2022
Judgment of: JUDGE STREET
Date of judgment: 20 September 2022
Catchwords: BANKRUPTCY –– whether the petitioning creditor has made out the statutory requirements to support the seeking of a sequestration order – whether any defects affect the creditor’s petition – whether the defects fall under s 306 of the Bankruptcy Act 1966 (Cth) – no substantive injustice suffered – whether other sufficient cause has been made out why a sequestration order ought not to be made – no bona fide counter-claim, set-off or cross-demand – sequestration order made
Legislation:

Bankruptcy Act 1966 (Cth) ss 27, 43, 47, 52, 306

Criminal Code Act 1995 (Cth)

Federal Court of Australia Act (Cth) s 37AO(2)

Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 1.04, 2.06, 4.04

Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 15.16

Cases cited:

Adams v Lambert [2006] 225 ALR 396,

ANZ Banking Group Ltd v Elferkh [1999] FCA 1049

Cristova v Tan & Tan Lawyers Pty Ltd [2018] FCAFC 41

Daly v Watson (1994) 128 ALR 309

Donovan v Brown [2021] FCA 494

Ebert v Union Trustee Company of Australia Ltd (1960) 104 CLR 346

Hoskin v Robert Balzola & Associates (Legal) Pty Ltd [2019] FCA 1353

McDonald v Official Trustee in Bankruptcy [2001] FCA 140

Re Cirillo; Ex parte Commissioner of Taxation [1992] 36 FCR 2709

Division: Division 2 General Federal Law
Number of paragraphs: 79
Date of hearing: 14 September 2022
Place: Sydney
Counsel for the Applicant: Mr C Slater
Solicitor for the Applicant: Jackson McDonald
Solicitor for the Respondent: In person

ORDERS

PEG 96 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

CTI LOGISTICS LTD - ACN 008 778 925

First Applicant

MARK VANDERLIST

Second Applicant

TIM BARTON

Third Applicant
AND:

CELESTINE OGBONNA

Respondent

order made by:

JUDGE STREET

DATE OF ORDER:

20 September 2022

THE COURT ORDERS THAT:

1.A sequestration order is made against the estate of Celestine Ogbonna. 

2.The petitioning creditors’ costs of the petition fixed in the amount of $10,324.16 be paid out of the estate with a priority to which it is entitled against the bankrupt estate.

THE COURT NOTES THAT:

1.The act of bankruptcy occurred on 29 November 2021.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

REASONS FOR JUDGMENT

JUDGE STREET:

introduction

  1. These are proceedings within the Court’s jurisdiction under s 27 of the Bankruptcy Act 1966 (Cth) (“the…

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CTI Logistics v Ogbonna [2022] FedCFamC2G 781
Case
[2022] FedCFamC2G 781
Decision Date

CaseChat Overview and Summary

The case of CTI Logistics v Ogbonna involved a dispute between creditors and a respondent, Celestine Ogbonna, concerning a sequestration order. The creditors sought to have Ogbonna declared bankrupt due to an outstanding debt stemming from a final judgment. The Court was tasked with deciding whether the creditors' petition should be dismissed based on several grounds of opposition raised by Ogbonna. The key issues were whether the notice to admit facts was improperly handled, if there was a valid counter-claim in defamation, and if any other sufficient cause existed to prevent the sequestration order.

The Court first examined the notice to admit facts, which Ogbonna claimed was improperly handled. The Court found that the notice contained content that was not factual but rather legal arguments. Additionally, Ogbonna had responded to the notice within the stipulated time, which was deemed a valid response. Consequently, the Court concluded that the notice to admit facts did not provide a valid reason to dismiss the creditors' petition.

Next, the Court addressed the claim that the outcome of previous defamation proceedings was tainted by fraud, which Ogbonna argued justified a counter-claim. The Court dismissed this contention as baseless, finding no evidence to support Ogbonna's claims of fraud or defamation. Furthermore, the Court found no real or bona fide counter-claim that would justify dismissing the creditors' petition.

After evaluating the evidence and submissions, the Court concluded that the creditors had met the requirements for a sequestration order, and Ogbonna had not provided sufficient cause to prevent it. The Court found that Ogbonna was unable to pay his debts and that no other sufficient cause existed to dismiss the petition. Therefore, the Court ordered that a sequestration order be made against Ogbonna's estate.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The Court finds that the first ground of opposition to the creditor’s petition provides no proper basis why a sequestration order ought not to be made.Ground 2 – Alleged Failure in relation to a Notice to Admit Facts The second ground upon which the notice of objection contends that the creditor’s petition should be dismissed makes reference to a notice to admit facts and the absence of a service of a notice disputing facts. On the respondent’s evidence, it is apparent that the notice to admit facts identified four paragraphs, and contained content that could not fairly be described as “facts”. Paragraph 1 of the notice to admit facts made reference to the requirement in the Bankruptcy Rules in respect of the respondent’s application to set aside the bankruptcy notice. Rule 2.06 was relevant in that application but is not relevant to these proceedings. Further, it is apparent that r 2.06 was subject to r 1.04 of the Bankruptcy Rules. Further, the content of paragraph 1 appears to be a contention of legal construction or argument and does not fairly reflect a fact engaging the relevant provisions of the Bankruptcy Rules in respect of a notice to admit. Paragraph 2 of the notice to admit facts appears also to be an argument of law or submission as to the application of provisions of the Act and Bankruptcy Rules. Paragraph 2 does not, on its face, identify a fact engaging the Bankruptcy Rules or the GFL Rules in respect of a notice to admit facts. Paragraph 3 of the notice to admit facts also appears to be a submission or contention of law in respect of the validity of the creditor’s petition and does not reflect a fact capable of being the subject of a notice to admit facts under the Bankruptcy Rules or the GFL Rules. Paragraph 4 of the notice to admit facts also advances an alleged submission of law and does not articulate a fact capable of being the subject of a notice to admit facts under the Bankruptcy Rules or the GFL Rules. Further and in any event, it is apparent that there was a response sent which, under the Bankruptcy Rules and the GFL Rules, did not have to be in a particular form. That response, which was sent by a letter dated 31 August 2022, was within the time period applicable under the GFL Rules and squarely identified the same as being formal notice pursuant to the GFL Rules that the facts are not admitted. The Court finds that that was a valid response to the notice to admit facts, even if it were otherwise capable of being said to articulate facts to which the Bankruptcy Rules or GFL Rules could apply. No relevant admissions arise from the respondent’s purported notice to admit facts because the facts if so characterised were disputed within time. Accordingly, the reference to the notice to admit facts does not identify any basis as to why the creditors’ petition should be dismissed.Ground 3 – Alleged Counter-Claim in Defamation In relation to the third ground in the notice of opposition, the respondent contends that the outcome of the Second Defamation Proceedings were tainted by fraud and that there remains a counter-claim in relation to the defamation proceedings. This proposition of the Second Defamation Proceedings being tainted because of the existence of fraud is not supported by any proper evidence and is baseless. There is no real or bona fide counter-claim, set-off or cross demand arising from alleged defamation or fraud. The respondent has made out no prima facie case or fair chase of success as explained above and Court is not satisfied that there is any fraud or defamation suit that the respondent has demonstrated that the he is entitled to litigate.

Evidence

Evidence Before The Court

These are proceedings within the Court’s jurisdiction under s 27 of the Bankruptcy Act 1966 (Cth) (“the “Act”) in which the petitioning creditors (“the applicants”) seek a sequestration order against the respondent. A bankruptcy notice was issued on 6 June 2019 in respect of a final judgment in the sum of $22,762.00, which, together with interest, amounted to $29,050.63 (“the Judgment Debt”). The final order upon which the bankruptcy notice was founded was made by a judge of the then Federal Circuit Court of Australia on 28 August 2015. evidence At the commencement of the hearing, the Court identified the affidavit evidence relied upon by the applicants, being the affidavit of Chelsea Lee Quirk dated 11 May 2022, the affidavit verifying paragraphs 1, 2 and 3 of David Anderson Mellor dated 16 May 2022, the affidavit of service of the bankruptcy notice of Simon Ross Ringrose dated 22 April 2022, the affidavit of service of the creditors petition of Fedel Conti dated 26 May 2022, the affidavit of David Robert Watson dated 19 August 2022, the affidavit of search (updated) dated 13 September 2022, the affidavit of debt (updated) dated 13 September 2022 and the affidavit of service (updated) dated 14 September 2022. The Court also accepted into evidence the affidavit of the respondent dated 4 July 2022, the affidavit of the respondent dated 8 August 2022, the affidavit (in two parts) of the respondent dated 9 September 2022, and the affidavit of the respondent dated 13 September 2022.submissions The applicants rely upon written submissions dated 1 September 2022 and put oral submissions that any defect in the petition was an irregularity within s 306 of the Act, that there was no substantive injustice occasioned by any defect, that the applicants had adduced proof of the requirements under s 52 of the Act, and that a sequestration order ought to be made. The applicants submitted that none of the grounds in the notice dated 9 September 2022 were made out, and that the respondent had not proven solvency or other sufficient cause why a sequestration order ought not to be made. The respondent put lengthy oral submissions, contending that he was a victim whose rights had been infringed. The respondent contended that the defects were fatal to the petition, and alleged that they had occasioned substantive injustice. The respondent maintained that his grounds of opposition made out other sufficient cause not to make a sequestration order. The respondent also addressed, at length, on his proposed application and proposed statement of claim annexed to his affidavit, dated 13 September 2022 to contend that he had a genuine counter-claim and that this proposed process identified other sufficient cause not to make a sequestration order. The respondent also submitted that because of the time that had expired, no sequestration order ought to be made.LITIGATION HISTORY Following the making of the final order the subject of the bankruptcy notice, the respondent applied for an extension of time to appeal on 25 September 2015. The applicants decided not to seek payment of the Judgment Debt until the appeal was determined. On 11 March 2016, the learned Honourable Justice Barker granted the respondent an extension of time to appeal, but then dismissed the appeal.

Decision

Reasons for decision

Ground 3 otherwise appears to assume an absence of challenge to the existence of a cross-claim, set-off or counter-demand which is, on its face, clearly contradicted by the contested proceedings upon which the respondent was ultimately unsuccessful in seeking to set aside the statutory demand. No other sufficient cause as to why a sequestration order ought not to be made has been made out by ground 3.conclusion The applicants have established the grounds upon which a sequestration order may be made. The respondent has not established that he is able to pay his debts. The respondent has not satisfied the Court that as to other sufficient cause why a sequestration order ought not to be made. The Court is satisfied that a sequestration order should be made in this case. Accordingly, the Court orders that a sequestration order be made against the estate of Celestine Ogbonna.

Ratio Decidendi

Legal Principle Established

Section 43 of the Act is as follows:SECT 43 – Jurisdiction to make sequestration orders(1) Subject to this Act, where:a. a debtor has committed an act of bankruptcy; andb. at the time when the act of bankruptcy was committed, the debtor:i. was personally present or ordinarily resident in Australia;ii. had a dwelling-house or place of business in Australia;iii.was carrying on business in Australia, either personally or by means of an agent or manager; oriv.was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.(2)Upon the making of a sequestration order against the estate of a debtor, the debtor becomes a bankrupt, and continues to be a bankrupt until:a. he or she is discharged by force of subsection 149(1); orb.his or her bankruptcy is annulled by force of subsection 74(1) or 153A(1) or under section 153B. Section 47 of the Act is as follows:SECT 47 – Requirements as to creditor's petition(1)A creditor's petition must be verified by an affidavit of a person who knows the relevant facts.(1A) If the rules of court prescribe a form for the purposes of this subsection, the petition must be in the form prescribed.(2)Except with the leave of the Court, a creditor's petition shall not be withdrawn after presentation. Section 52 of the Act is as follows:SECT 52 – Proceedings and order on creditor's petition(1)At the hearing of a creditor's petition, the Court shall require proof of:a.the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);b. service of the petition; andc.the fact that the debt or debts on which the petitioning creditor relies is or are still owing;and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.(1A) If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver before the end of the period of 2 days beginning on the day the order was made.Penalty: 5 penalty units.Note: See also section 277B (about infringement notices).(1B) Subsection (1A) is an offence of strict liability.Note: For strict liability, see section 6.1 of the Criminal Code.(2)If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:a. that he or she is able to pay his or her debts; orb.that for other sufficient cause a sequestration order ought not to be made;it may dismiss the petition.(3)The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.(4)A creditor's petition lapses at the expiration of:a.subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; orb.if the Court makes an order under subsection (5) in relation to the petition--the period fixed by the order;unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.(5)The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor's petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order.