Da Vesi Construction Group Pty Ltd v De Andrade

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FEDERAL COURT OF AUSTRALIA

Da Vesi Construction Group Pty Ltd v De Andrade [2021] FCA 1033  

File numbers: ACD 16 of 2021
ACD 51 of 2021
Judgment of: THAWLEY J
Date of judgment: 13 August 2021
Date of publication of reasons: 26 August 2021
Catchwords:

BANKRUPTCY AND INSOLVENCY – creditor’s petition for sequestration order under s 43 of the Bankruptcy Act 1966 (Cth) – sequestration order made

BANKRUPTCY AND INSOLVENCY – application seeking order determining “that the bankrupt no longer be stayed from appealing an ACT Magistrates Court decision” – application seeking stay of proceeding ACD 16 of 2021 until proceeding ACD 51 of 2021 determined – proceeding ACD 51 of 2021 dismissed
Legislation:

Bankruptcy Act 1966 (Cth) ss 33(1)(a), 43, 52, 58(3), 82

Federal Court (Bankruptcy) Rules 2016 (Cth) rr 4.02, 4.04, 4.05, 4.06

Federal Court of Australia Act 1976 (Cth) s 35A(5)
Cases cited:

Cummings v Claremont Petroleum NL (1996) 185 CLR 124

Da Vesi Construction Group Pty Ltd (ACN 122 278 735) v Rubie De Andrade [2019] ACTMC 1

Da Vesi Construction Group Pty Ltd v De Andrade [2019] FCA 553

Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52

Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132

Wren v Mahony (1972) 126 CLR 212
Division: General Division
Registry: Australian Capital Territory
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 46
Date of hearing: 13 August 2021
Solicitor for the Applicant in ACD 16 of 2021: Mr T Häkkinen with Mr R Markham of Adero Law
Counsel for the Respondent in ACD 16 of 2021 and the Applicant in ACD 51 of 2021: Mr R Thomas
Solicitor for the Respondent in ACD 16 of 2021 and the Applicant in ACD 51 of 2021: Boettcher Law
Solicitor for the Respondent in ACD 51 of 2021: Mr N Bookseller of Chamberlains

ORDERS

ACD 16 of 2021

IN THE MATTER OF ROUBA MARHABA REBELLO DE ANDRADE
BETWEEN:

DA VESI CONSTRUCTION GROUP PTY LIMITED (ACN 122 278 755)

Applicant
AND:

ROUBA MARHABA REBELLO DE ANDRADE

Respondent

ORDER MADE BY:

THAWLEY J

DATE OF ORDER:

17 AUGUST 2021

THE COURT ORDERS THAT:

1.The estate of Rouba Marhaba Rebello De Andrade be sequestered under the Bankruptcy Act 1996 (Cth).

2.The Applicant Creditor file a long form bill of costs on or before 18 August 2021.

3.The Applicant Creditor’s costs in a sum to be fixed by a Registrar of the Court be paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1996 (Cth).

THE COURT NOTES THAT:

4.The Applicant Creditor holds security over the property of the Respondent Debtor consisting of a charge and equitable mortgage over the property at 28 Lefroy Street, Griffith which the Applicant Creditor surrenders for the benefit of creditors generally.

5.The date of the act of bankruptcy is 12 March 2021.

6.A consent to act as trustee signed by Aaron Boyd Torline has been served on the Respondent.

Note:   Entry…

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Details
Case
[2021] FCA 1033
Decision Date

CaseChat Overview and Summary

The case of Da Vesi Construction Group Pty Ltd v De Andrade involved a creditor's petition for a sequestration order under the Bankruptcy Act 1966 (Cth) against Ms Rubie De Andrade. The dispute centred around a contractual obligation for construction services and materials provided by Da Vesi to Ms De Andrade for a dwelling in Griffith, ACT. The proceedings began in the ACT Magistrates Court, where Da Vesi sought damages for breach of contract or, alternatively, a quantum meruit for the work completed and materials supplied. The case resulted in a judgment in favour of Da Vesi, ordering Ms De Andrade to pay $194,435.57, along with costs. Ms De Andrade did not comply with the orders, leading to a bankruptcy notice and subsequent sequestration of her estate.

The primary legal issues addressed in the case were whether Ms De Andrade's failure to pay costs and comply with the judgment order constituted sufficient grounds for a second sequestration order, and whether the second costs order made by consent was valid given Ms De Andrade's status as a bankrupt at the time. Additionally, the court considered whether there was "other sufficient cause" to justify a second bankruptcy, and if the second costs order could be set aside as it was made without proper consent due to Ms De Andrade's bankruptcy.

The court concluded that there was no evidence of an order for costs on 24 January 2019, contrary to the affidavit's assertions, and that Ms De Andrade's consent to the second costs order was invalid due to her bankruptcy status. The court determined that the first trustee had accepted the principal judgment debt, which had vested in the first bankruptcy prior to the second costs order. Consequently, the court found no proper basis for a second bankruptcy relying on the second costs order. Additionally, the court found that Ms De Andrade had not demonstrated "other sufficient cause" for a second sequestration order.

The court dismissed the application, concluding that there were no grounds for a second sequestration order. The final order was to dismiss the application, reflecting the court's determination that Ms De Andrade's situation did not warrant a second bankruptcy proceeding.

Orders

Orders of the court

1. The application be dismissed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The respondent to those proceedings, the trustee in bankruptcy, was excused from further attendance.BACKGROUND In about 2014, Da Vesi commenced proceedings against Ms De Andrade in the ACT Magistrates Court (proceeding CS 835 of 2014). Da Vesi was a company which provided construction and management services. It claimed against Ms De Andrade damages for breach of contract or, alternatively, on a quantum meruit for work done and materials provided in relation to a new dwelling constructed on Ms De Andrade’s property in Griffith in the ACT. On 6 September 2017, Magistrate Fryar made an interlocutory order that Ms De Andrade pay Da Vesi’s costs in the amount of $5,191.14. Ms De Andrade did not pay those costs. Da Vesi served a bankruptcy notice on Ms De Andrade on 17 November 2017. Ms De Andrade failed to comply with the bankruptcy notice by 8 December 2017. The Magistrates Court proceedings were heard by Magistrate Fryar on 16, 17 and 27 November 2017 and 19 December 2017. Judgment was reserved. On 26 October 2018, a Registrar of this Court made orders that the estate of Ms De Andrade be sequestrated under the Bankruptcy Act 1966 (Cth) and that the applicant creditor’s costs, fixed in the sum of $4,483.50, be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act: Da Vesi Construction Group Pty Ltd v De Andrade [2019] FCA 553 at [1]. Nick Combis of Vincents was appointed the trustee of Ms De Andrade’s bankrupt estate. On 24 January 2019, Magistrate Fryar handed down judgment in favour of Da Vesi, concluding that Ms De Andrade was liable for breach of contract, and ordered Ms De Andrade to pay $194,435.57: Da Vesi Construction Group Pty Ltd (ACN 122 278 735) v Rubie De Andrade [2019] ACTMC 1. At [20], in relation to costs, Magistrate Fryar stated:I note the plaintiff in submissions sought to be heard in relation to costs. The usual course is that costs follow the event. However if the parties still wish to be further heard in relation to costs I give leave for an approach to be made to my associate to have the matter listed before me during the week commencing 11 February 2019. On 8 February 2019, Ms De Andrade filed an interlocutory application in the Federal Court of Australia seeking an extension of time for seeking a review under s 35A(5) of the Federal Court of Australia Act 1976 (Cth) of the Registrar’s decision to make a sequestration order. Five days later, on 13 February 2019, Magistrate Fryar made the following costs order by consent:By consent, the Defendant is to pay the Plaintiff’s costs to be assessed on a party/party basis up to and including 28 June 2017 and thereafter on an indemnity basis. The consent was given by Ms De Andrade’s solicitor at the time, Mr John O’Keefe. On 23 April 2019, Robertson J refused the application for an extension of time and for review of the Registrar’s sequestration order: Da Vesi Construction Group Pty Ltd v De Andrade [2019] FCA 553. On 24 April 2019, Ms De Andrade’s then solicitor, Mr Peter Christensen, sent a letter to the trustee, Mr Combis, seeking his consent as trustee to Ms De Andrade bringing an appeal from Magistrate Fryar’s order that Ms Andrade pay damages for breach of contract in the amount of $194,435.57.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The grounds of opposition were supported by an affidavit of Ms Shelley Anne Mulherin affirmed on 1 July 2021. This affidavit states at [6] and [7]:6. On 24 January 2019, judgment was entered in the ACTMC Proceeding for Da Vesi and the Bankrupt was ordered to pay Da Vesi’s costs of the proceeding (ACTMC Judgment). A copy of the ACTMC Judgment is annexed hereto and marked SAM-5.7. On 13 February 2019, the costs order in the ACTMC Judgment was varied and the Bankrupt was ordered to pay Da Vesi’s costs of the ACTMC Proceeding on a party/party basis up to and including 28 June 2017 and thereafter on an indemnity basis (Second Costs Order). A copy of the Second Costs Order is annexed hereto and marked SAM-6. It should be observed that there is no evidence that Magistrate Fryar made an order for costs on 24 January 2019 notwithstanding the paragraphs of this affidavit, and that proposition is not consistent with her Worship’s reasons, which indicate that she only gave judgment for damages for breach of contract. She also made observations about the usual order for costs, noting that Da Vesi wanted to be heard and giving leave for the parties to approach her Associate. As to “other sufficient cause”, the affidavit stated:16. On 24 May 2021, Mr Rory Markham wrote to me and indicated that the First Trustee had accepted and largely paid the principal judgment which arose in the ACTMC Judgment (notwithstanding that the ACTMC Judgment was delivered after the date of Ms De Andrade’s bankruptcy). A copy of that email is annexed hereto and marked SAM-12.17. I have inferred, but do not know, that the First Trustee considered that the judgment debt was merely the crystallisation of an unliquidated contractual debt that vested in the first bankruptcy on 26 October 2018 (that is, prior to the judgment debt arising on 24 January 2019) by virtue of section 82 of the Bankruptcy Act.18. As the contractual debt in the ACTMC Judgment has been accepted by the First Trustee, the Court should consider whether there is any proper basis for a second bankruptcy, in reliance on the Second Costs order, which arose as a consequence of the ACTMC Judgment.19. Further, the Court should consider whether it is entitled to go behind the Second Costs Order on the basis that it was an order made by consent, in circumstances where the Bankrupt was bankrupt and was therefore not able to consent to it and in the premises of section 58(3) of the Bankruptcy Act.…20. The Bankrupt is concerned that Da Vesi was aware of her bankruptcy at all times, as it was the petitioning creditor which moved the Court for sequestration orders against her in October 2018. The Bankrupt is also concerned that Da Vesi apparently failed to inform the Magistrates Court of her bankruptcy when it moved the Court for the Second Costs Order, which relied on the Bankrupt’s vitiated consent. After the filing of the grounds of opposition, the affidavit and written submissions, Ms De Andrade ceased to be represented for a period.

Ratio Decidendi

Legal Principle Established

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