De Lage Landen Pty Limited v Chaikh
[2022] FedCFamC2G 181
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
De Lage Landen Pty Limited v Chaikh [2022] FedCFamC2G 181
File number(s): SYG 889 of 2021 Judgment of: JUDGE GIVEN Date of judgment: 9 March 2022 Catchwords: BANKRUPTCY - urgent interim application made by the applicant under to rule 2.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) - orders sought pursuant to s 50 of the Bankruptcy Act 1966 (Cth) Legislation: Bankruptcy Act 1966 (Cth), ss 27, 30, 50
Conveyancing Act 1919 (NSW) s 37A
Bankruptcy Regulations 2021 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth)
Federal Circuit and Family Cout of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)
Cases cited: Coshott v Principal Strategic Options Pty Ltd [2004] FCAFC 50
Curtis v NID Pty Ltd [2010] FCA 1072
Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118
Ewert v Martin [2018] FCA 1931
Sogelease Australia Ltd v Griffin (2003) 128 FCR 399
Division: Division 2 General Federal Law Number of paragraphs: 63 Date of hearing: 9 March 2022 Place: Sydney Counsel for the Applicant: Mr FFF Salama Solicitor for the Applicant: Holman Webb Lawyers The Respondent: There was no appearance by or on behalf of the Respondent ORDERS
SYG 889 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: DE LAGE LANDEN LIMITED (ACN 101 692 040)
Applicant
AND: MAHMOUD CHAIKH
Respondent
ORDER MADE BY:
JUDGE GIVEN
DATE OF ORDER:
9 MARCH 2022
THE COURT ORDERS THAT:
1.Pursuant to r 9.03(2) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) leave is granted to the solicitors for the respondent debtor, Mahmoud Chaikh, to file and serve a Notice of Withdrawal of Lawyer at any time from today, being 9 March 2022.
2.For the purposes of r 9.03(5) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) the respondent debtor, Mahmoud Chaikh’s, last known residential address for service will be taken to be [Mahmoud Chaikh’s current residential address as provided to the Court] in lieu of the address for service which was provided in the Notice of Intention to Withdraw as Lawyer (Notice of Intention) filed with the Court on 4 March 2022, together with the email address for service which was included in the Notice of Intention.
UPON THE APPLICANT, BY ITS COUNSEL, GIVING THE USUAL UNDERTAKING AS TO DAMAGES:
3.Pursuant to section 50 of the Bankruptcy Act 1966 (Cth) (Act), Andrew John Scott of PricewaterhouseCoopers be appointed as Trustee take control of all property (as defined in s 5 of the Act) of the respondent debtor Mahmoud Chaikh, until the making of a sequestration order under s 43 of the Act or otherwise the disposition of the Applicant’s creditor’s petition filed on 20 May 2021.
4.Without limitation of order 3 above, the respondent debtor, Mahmoud Chaikh, is restrained from dealing with, or disposing of, the property situated at 21 Trevanna Street, Busby, NSW, 2168 being the land described in certificate of Title Folio Identifier 815/223956.
5.The applicant is to serve the following documents on the respondent debtor, Mahmoud Chaikh by 5:00pm on 9 March 2022:
(a)A copy of these sealed orders;
(b)The interim application dated 4 March 2022 which was filed on 7 March 2022;
(c)The Affidavit of Michelle Taylor affirmed 4 March 2022 and filed in these proceedings, together with its Exhibits;
(d)The Affidavit of Michelle Taylor affirmed 9 March 2022 and filed in these proceedings;
(e)The Affidavit of Norman Brodbeck affirmed 21 October 2021 and filed in these proceedings, together with its Exhibits; and
(f)Exhibit “1A” being the Consent to Act as Trustee Declaration.
6.For the purpose of order 5 above, service is to be effected by:
(a)Sending the documents to the respondent at the email address specified in the Notice of Intention to Withdraw As Lawyer filed on 4 March 2022; or
(b)Sending the documents to the respondent by a document compression/cloud facility (for example DropBox or WeTransfer) with the link to same being sent/directed to the email address as specified in the Notice of Intention to Withdraw As Lawyer filed on 4 March 2022; or
(c)Some combination of the methods specific in orders [5(a)] and [5(b)] above.
7.The applicant file and serve an Affidavit of service evidencing compliance with orders 5 and 6 above by 4.00pm on 10 March 2022.
8.The creditor’s petition remains listed for hearing before a Registrar of the Court at 10.00am on 13 April 2022.
9.Costs of this application are reserved.
10.The parties are granted liberty to apply on 2 clear days’ notice.
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).
EX TEMPORE REASONS FOR JUDGMENT
(revised from transcript)JUDGE GIVEN:
I have before me an urgent interim application made by the applicant under to r 2.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules), seeking that I make orders pursuant to s 50 of the Bankruptcy Act 1966 (Cth) (Act) as follows:
1.Andrew John Scott PWC be appointed as Trustee pursuant to section 50 of the Bankruptcy Act 1966 (Cth) (‘Act’) to take control of all “property” as defined in section 5 of the Act of the Respondent, including but not limited to the property situated at 21 Trevanna Street, Busby, NSW 2168 being the land described in the certificate of Title Reference 815/223956
2.The Respondent hereby be restrained, without prior approval of the Court, from dealing with or in any way disposing of the property situated at 21 Trevanna Street, Busby, NSW 2168.
The application has come before me today as Duty Judge and was (ultimately) heard ex parte. For reasons that I will detail shortly, the respondent’s solicitor did attend this morning for the purpose of seeking leave to withdraw with an order abridging the time to do so under the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (Rules). I granted that leave and excused him from further attendance.
In support of the interim application before me today I have received the following evidence:
(a)An Affidavit of Michelle Taylor made 7 March 2022 (Taylor Affidavit). Ms Taylor is a recoveries officer in the employ of the applicant authorised and, in my view, qualified to make such an Affidavit by reference to the matters deposed to, in particular, at [4] to [6] thereof;
(b)An Affidavit of Michelle Taylor made today, 9 March 2022 (Affidavit of debt);
(c)An Affidavit of Norman Brodbeck, sworn 21 October 2021; and,
(d)An updated Trustee Consent to Act Declaration from Andrew John Scott of PricewaterhouseCoopers which was tendered for the applicant and marked Exhibit “1A”.
Pursuant to s 27 of the Act, this Court has concurrent jurisdiction with the Federal Court of Australia in relation to bankruptcy. Section 30 of the Act sets out the powers of the Court in relation to bankruptcy as follows:
(1) The Court:
(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
(2) The Court may direct such inquiries to be made and accounts to be taken for the purposes of any proceeding before the Court as the Court considers necessary and may, when directing an account to be taken, or subsequently, give special directions as to the manner in which the account is to be taken or vouched.
(3) If in a proceeding before the Federal Court under this Act a question of fact arises that a party desires to have tried before a jury, the Federal Court may, if it thinks fit, direct the trial of that question to be had before a jury, and the trial may be had accordingly in the same manner as if it were the trial of an issue of fact in an action.
(5) Where:
(a) a bankrupt, a debtor or any other person has failed to comply with an order or direction of a Registrar, or with a direction or requirement of an Official Receiver or trustee, under this Act; or
(b) a trustee has failed to comply with an order, direction or requirement of a Registrar, or with a requirement or request of the Inspector-General, under this Act;
the Court may, on the application of the Registrar, Official Receiver, trustee or Inspector-General, as the case requires:
(c) order the person who has failed to comply with the order, direction, requirement or request, as the case may be, to comply with it; or
(d) if it thinks fit, make an immediate order for the committal to prison of that person.
(6) The power conferred on the Court by subsection (5) is in addition to, and not in substitution for, any other right or remedy in respect of the failure to comply with the order, direction, requirement or request, as the case may be.
Sections 50(1),(1A) and (1B) of the Act, are as follows:
(1) At any time after a Bankruptcy Notice is issued, or a creditor's petition is presented, in relation to a debtor, but before the debtor becomes a bankrupt, the Court may:
(a) direct the Official Trustee or a specified registered trustee to take control of the debtor's property; and
(b) make any other orders in relation to the property.
(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.
(1B) If the Court directs a trustee to take control of the debtor's property, the Court must specify when the control is to end.
…
The applicant carries on a business which provides equipment finance to its clients, which includes leasing, rental facilities and chattel mortgages for the acquisition of equipment. The respondent is one such client. The full details of the respondent’s affairs with the applicant are not before me but they are also not strictly relevant given that they have emerged on judgment. In July 2020 the applicant commenced proceedings number 2020/00204045 in the District Court of New South Wales seeking to recover $346,769.35 against the respondent, which proceedings resulted in a default judgment issued in relation to the debt by which time it was $351,647.04. I have evidence that default judgment issued on 3 November 2020.
On 12 November 2020 the respondent was served with a Bankruptcy Notice, No 250833, which was issued on 11 November 2020 at 21 Trevanna Street, Busby, NSW, 2168 (Busby property). The Busby property is identified as title reference 815/223956 and a title search dated 4 March 2022 which forms annexure “MT-4” to the Taylor Affidavit reveals that:
(a)the respondent owns the property with a Barea Kreidie as joint tenants. I was informed by the solicitor for the respondent today from the Bar table and prior to him being excused that Ms Kreidie is the respondent’s wife; and,
(b)a mortgage to the Westpac Banking Corporation in respect of which I have no further details in particular as to the amounts owing. Those amounts are not presently known to the applicant and, therefore, also not known by the Court.
The respondent failed to comply with the Bankruptcy Notice and, accordingly, the applicant instructed its present solicitors to file the Creditor’s Petition with this Court, which has had the effect of commencing the present proceedings. The first return date for the Creditor’s Petition was 2 November 2021. On 11 October 2021 a Registrar of this Court made orders for substituted service on the respondent which was then effected on 18 October 2021. On 2 November 2021 the respondent apparently served a Notice of Address for Service on the applicant’s solicitors, although the Court file shows no record of such a document being filed. Rather, it was a handwritten document on the Court’s form and at that juncture it appears that the respondent intended to represent himself.
On 2 November 2021 a Registrar ordered by consent (and inter alia) that the Creditor’s Petition be listed for hearing at 2m on 16 November 2021. On 15 November 2021, being the date before the scheduled first return date to which the respondent had consented, a Notice of Address for Service was filed for the respondent with the effect that he was represented by solicitors in these proceedings. By that Notice of Address for Service the applicant’s residential address was still identified as being the Busby property. Despite its filing date, the Notice of Address for Service was curiously dated 11 August 2021. However, I will presume that to be a typographic error. An Affidavit was also filed for the respondent.
Annexure “MT-2” to the Taylor Affidavit indicates that the respondent’s solicitors in these proceedings were also instructed in the District Court proceedings to seek to set aside the District Court judgment which grounded the Bankruptcy Notice, on the basis that the judgment had been irregularly procured.
On 16 November 2021 a Registrar of this Court made orders by consent adjourning the matter again, in part due to the late service of the respondent’s evidence and listing the matter again on 8 December 2021. The matter further adjourned from that date when it transpired that a Notice of Motion seeking to set aside the default judgment had been filed in the District Court proceedings on 7 December 2021. This adjournment was accordingly by reason of the late filing of evidence/taking of steps by the respondent.
The Creditor’s Petition was next listed for a hearing before a Registrar of this Court on 18 February 2022. I note at this juncture that the basis for seeking to set aside the District Court judgment appears to have been that the Statement of Claim was not properly served on the respondent because substituted service had been obtained in the District Court proceedings also.
The respondent claimed by an Affidavit filed in this Court (made 7 December 2021), that he had not lived at the Busby property for approximately 18 months (at paragraph [8]). This was at odds with it having been included as his address in the Notice of Address for Service which was filed by his solicitor in this Court on 15 November 2021.
On 17 February 2022 this Court was advised that because the Notion of Motion filed in the District Court had been adjourned for hearing to a date not before 7 April 2022, the parties had agreed that these proceedings should go over to 13 April 2022 and, accordingly, a Registrar, on 18 February 2022, made those orders by consent.
On 25 February 2022 the respondent’s solicitors filed and served an Affidavit of the respondent in the District Court proceedings, which forms annexure “MT-7” to the Taylor Affidavit. As a matter of precaution, the solicitors for the applicant wrote to the solicitors for the respondent in relation to that Affidavit to confirm that the respondent would not rely on any further Affidavit in support of the Notice of Motion in the District Court proceedings. On 28 February 2022 the solicitors for the respondent replied to confirm that that was so. This is said to be a matter of moment for reasons I will detail later.
Ms Taylor deposes to being informed by the applicant’s solicitor on or about 28 February 2022 that he discovered (by a Google search) that the Busby property had been sold on 22 February 2022 for $780,000. On 1 March 2022 the applicant’s solicitors wrote to the respondent’s solicitors to express their concern regarding the sale and to foreshadow the present application or an application under s 37A of the Conveyancing Act 1919 (NSW). The letter also sought further information pertaining to the sale and its proceeds.
In particular, at “MT-9” the 1 March 2022 letter made clear that the applicant was not seeking to unnecessarily interfere with a bona fide sale of the Busby property and it was proposed that if there were a surplus of proceeds arising from the sale that those moneys (including any deposit moneys held by the real estate agent but less any reasonable costs associated with the conveyance or the agent’s commission and amounts properly due to the mortgagee) be paid into a solicitor’s trust account where they would be held pending the outcome of the Creditor’s Petition hearing, and would otherwise not be dispersed except with prior written approval of the applicant or an order of this Court.
The Taylor Affidavit indicates that, as at 7 March 2022, no response had been received to the 1 March 2022 letter as requested, or at all. On 4 March 2022 the respondent’s solicitor filed a Notice of Intention to Withdraw as Lawyer on the same date in this proceedings, and an equivalent document in the District Court proceedings.
By the Notice of Intention to Withdraw as Lawyer, the address for service given for the respondent was not the Busby property, but was a different residential address.
Part 9 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (Rules) which also applies to bankruptcy proceedings in certain respects does not require that a Notice of Intention to Withdraw as Lawyer actually be filed. Rather, said document is a condition precedent to being able to subsequently file, after seven days has elapsed, a Notice of Withdrawal itself. The period for being able to file that Notice of Withdrawal had, as at today, not yet expired.
The mechanism for withdrawal of a lawyer from a proceeding is generally usually utilised when the lawyer is terminating the relationship of their own motion. If the applicant was the instigator of the termination then he could have achieved it by filing a fresh Notice of Address for Service on his own or if he was replacing his current solicitor with another solicitor their Notice of Address for Service would have had the same effect.
As noted earlier, the solicitor for the respondent appeared before me today in order to seek leave to complete the withdrawal process early. I was told from the Bar table that the basis for terminating the arrangement with the respondent was a loss of confidence and an inability to obtain instructions. I am invited by Counsel for the applicant to infer from the chronology of events and from what the respondent’s solicitor said today that, upon receiving the 1 March 2022 letter, the respondent’s solicitor sought instructions from the respondent in relation to the proposed quarantining of funds set proposed by that letter, that they attempted to give him the right advice but that the respondent refused it. I am invited to infer that, it was on that basis, the solicitor formed a lack of confidence and sought to withdraw from both sets of proceedings.
In all of the foregoing circumstances, while it was very courteous of the solicitor to attend today, it would have been better if he had also extended that courtesy to replying to the 1 March 2022 letter, if only to indicate that he had no instructions or to foreshadow his withdrawal in advance of filing the notices which I understand took the applicant’s solicitor by surprise.
In any event, I granted leave to the respondent’s solicitor to withdraw early and have accepted information provided to the Court from the Bar table in relation to a more current address for service which will be encapsulated with these orders with the intent that it replaces the address for service of the applicant which is included in the Notice of Intention to Withdraw as Lawyer which, pursuant to r 9.03(5) of the Rules, otherwise becomes the default address for service once the Notice of Withdrawal is filed.
I was also informed from the Bar table today by the former solicitor for the respondent that the email address which is set out in the Notice of Intention to Withdraw and which concludes with @live.com.au, is the email address of the applicant’s wife Ms Kreidie, because the applicant does not speak English well. The respondent’s former solicitor indicated that Ms Kriedie has agreed to accept service at that email address. However, I note that this email address was initially given by the respondent in his initial Notice of Address for Service in these proceedings. It also seems from the correspondence in the Taylor Affidavit that it is regularly utilised by the respondent. Accordingly, I am satisfied that the email address can additionally be used to serve the respondent.
In support of the orders sought by the interim application, the Taylor Affidavit advances the following matters as warranting the Court’s exercise of discretion to make orders under s 50 of the Act:
(a)the sale of the Busby property; and
(b)the lack of response to the 1 March 2022 letter.
Counsel for the applicant told me today that had the respondent simply replied or sought to engage with the applicant in relation to the subject matter of the 1 March 2022 letter, then this application would not have been necessary. However, given the complete silence which followed, together with other conduct of the respondent, the applicant says they are now compelled to bring the application.
The principles in relation to making the orders under s 50 of the Act are reasonably well settled. The section is directed to aiding creditors of a debtor who has already committed an act of bankruptcy, and where there is a creditors petition pending, see Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118 at 123:
…a necessary and ancillary provision designed to enable appropriate steps to be taken to preserve and protect the property of a debtor so that, in the event of a sequestration order being made, that property will be available for distribution equitably amongst them in accordance with the statutory provisions contained elsewhere in the Bankruptcy Act 1996…
As is almost always the case in urgent interlocutory applications moreso where they are ex parte, the orders are intended to maintain a certain status quo.
Section 50(1A) of the Act sets out the requirements which must be satisfied before I make the order. In relation to s 50(1A)(a) the creditor has, by the interim application, sought the orders.
The power to make orders under s 50 of the Act is triggered upon the issuance of a Bankruptcy Notice rather than its service: see Sogelease Australia Ltd v Griffin (2003) 128 FCR 399 at [13] per Emmett J. I am required by s 50(1A) and (c) of the Act to be satisfied that the Bankruptcy Notice has not been complied with. In this regard, I am firstly satisfied that the Bankruptcy Notice was issued on 11 November 2020. Consequent on the respondent’s failure to comply with it, the Creditor’s Petition was issued on 20 May 2021. Accordingly, I am satisfied that the Bankruptcy Notice was not complied with. By reference to the Affidavit of debt made today, I am satisfied that the debt remains outstanding.
Lastly, s 50(1A)(b) of the Act requires that I be satisfied that it is in the interests of the creditors to make the orders prior to doing so. In assessing that factor and otherwise exercising the discretion to make orders under s 50 of the Act, the Court is widely accepted to have regard to the aforementioned purpose of the section as the governing factor.
However, other factors are relevant to the discretion and include the debtor’s conduct, the risk of dissipation of the assets, and any prejudice to the debtor which all should be balanced against the interests of the creditors and the purpose of the section: see Ewert v Martin [2018] FCA 1931 per Derrington J. While the aforementioned factors are not an exhaustive list, they do regularly arise for consideration and, on the evidence before me, they are each relevant to considering this particular case, to which I will also add any prejudice which may be caused to the respondent’s wife, Ms Kriedie.
Further, in the event that the Court makes an order then pursuant to s 50(1B) the Court is to specify when the control of the trustee is to end. Given the potential prospect of a sequestration order, in the event that I were to make orders under s 50, the most practical course is to provide an end date which is self-executing by reference to one of two events, either:
(a)the making of a sequestration order under s 43 of the Act; or otherwise
(b)the disposition of the Creditor’s Petition.
Of course, and like so many urgent ex parte injunctions, in the event that the sequestration orders were not made and the Creditor’s Petition were, for example, dismissed, there may exist a circumstance in which damages may result from the s 50 orders.
In this regard, it can be appropriate to order that the orders made pursuant to s 50 be subject to the usual undertaking as to damages, notwithstanding regulation 16(2) of the Bankruptcy Regulations 2021 (Cth) (Regulations) which provides that the Court may, on application by the debtor within 15 business days after the day the petition is dismissed, order the creditor to pay the debtor an amount equal to the damage the Court assesses as resulting from the acts or omissions of the trustee in reliance on the direction or other order mentioned in regulation 16(1)(b) of the Regulations.
In the present matter I consider it necessary that the applicant give the usual undertaking.
That is because by restraining the respondent from dealing with his property I am also preventing Ms Kriedie, who is the person with whom the respondent owns the Busby property, from dealing with it, and also from any other property which they may own jointly. In the event the Creditor’s Petition were ultimately dismissed, the respondent has a statutory right to seek damages but the other owner does not: see Coshott v Principal Strategic Options Pty Ltd [2004] FCAFC 50 at [2] per their Honours Finn, Emmett and Selway JJ.
Counsel for the applicant has provided the undertaking on instructions, which I will accept as being a precondition to any orders that I may make.
I have before me some basic evidence as to the events which led to the issuance of the Bankruptcy Notice and, ultimately, the Creditor’s Petition. I infer from the fact that the applicant obtained default judgment in the District Court proceedings that the respondent did not defend those proceedings at any time they were on foot. It is true that the respondent has subsequently taken some steps to set that judgment aside, but at least from the chronology of each of those events there seems to have been a lack of diligence on the respondent’s part to engage with those proceedings in real-time.
Similarly, upon these proceedings being commenced a Registrar of this Court was satisfied on the material filed for the applicant that it was not possible to serve the respondent. However, there is nothing before me to suggest that the respondent was necessarily or deliberately avoiding service, even if such an inference is often available in the context of a substituted service application.
What I can observe from the conduct of these proceedings is that from the time that the respondent was served there does appear to have been a pattern, namely that nothing has been done on each occasion until the day before the proceedings were due to return before the Court. There have been no fewer than six adjournments of the Creditor’s Petition, all with the consent of the applicant, but all because of some delay of the respondent’s own making.
While the imminence of a Court fixture often focuses a party’s attention on steps which need to be taken a clear pattern of six, consecutive, eleventh hour adjournment requests leaves open the inference that these adjournments have been a strategy in the proceedings.
The evidence before me indicates that the Busby property was sold on 22 February 2022. I accept that it has been. I take judicial notice of the fact that this “sold” marking on a major real estate website is likely to reflect that the respondent, together with his wife, who is a joint tenant and would have been the joint vendor with him, exchanged contracts for the sale of land on or about 22 February 2022. In order for that to have occurred, the Busby property would have needed to have been listed for sale prior. Having regard to the fact that the respondent was part of a joint approach to this Court on 17 February 2022 seeking to have the proceeding adjourned until April 2022 to enable the motion in the District Court to be heard, even if the respondent were not already entertaining the purchase offer, it is open to infer that by that time he had already listed the Busby property for sale.
The absence of any disclosure of that fact to the applicant of the listing itself is concerning and I take the omission to be deliberate. However, even allowing for there being some legitimate excuse for failing to disclose the fact of the listing, the failure to then disclose the exchange of contracts in relation to the Busby property prior to, or at the time of it occurring, and in circumstances where the future of these proceedings was being relevantly discussed and timetabled is further concerning. I can see no legitimate basis for failing to make that disclosure in relation to the sale, particularly after it had taken place, much less to have failed to respond to direct inquiries made for the applicant by the 1 March 2022 letter.
Having regard to the foregoing matters in relation to the consistent adjournment requests in relation to the hearing of the Creditor’s Petition, I am inclined to think that the respondent has sought to intentionally delay these proceedings and the hearing of the Creditor’s Petition. Counsel for the applicant describes in this regard the respondent’s conduct as underhanded, noting that as at the time that the 1 March 2022 letter was sent it was sent to the respondent’s lawyers who, at that time, remained on the record. As noted earlier, it is submitted to me that from the lack of response to that letter and the almost immediate filing of Notices of Intention to Withdraw from these proceedings and also the District Court proceedings, that the Court must infer that the respondent’s solicitors gave him particular advice in relation to the need to respond to the 1 March 2022 letter and that the respondent refused to accept that advice.
In my view, the respondent has deliberately failed to disclose the potential forthcoming sale of the Busby property and, more significantly, the actual fact of its eventual sale. Further, and notwithstanding that the respondent is aware of the judgment debt which grounds the Bankruptcy Notice and the subsequent Creditor’s Petition, he has failed to engage at all with the applicant creditor in relation to the details of the sale. The applicant says that it is a matter of moment that, on very scant evidence indeed, there is no real prospect that the District Court of New South Wales would set aside the judgment that was entered last year.
All of these factors weigh in favour of the making of an order under s 50 of the Act.
In relation to the risk of dissipation of assets, while there is some conjecture arising from the jurisprudence relating to Mareva injunctions as to whether that consideration is strictly necessary in the context of s 50 orders (see, for example, Ewert v Martin (supra) citing Curtis v NID Pty Ltd [2010] FCA 1072 per Edmonds J) this consideration is relevant in the instant case.
The consideration goes to whether there is a risk that, unless prevented from doing so by the Court, the respondent will dissipate his assets to avoid meeting his liabilities. The Busby property has already been sold insofar as contracts have (at least) exchanged. As a result of the respondent by his solicitors failing to respond to the very legitimate questions raised by the 1 March 2022 letter and the very sensible course of action which was proposed therein, the applicant’s Counsel was unable to inform me today as to any details of the contract for sale, in particular the settlement date. That is not, in any way, a criticism of the applicant’s Counsel. Rather, it is a state of affairs which as mentioned in relation to my consideration of the conduct of the respondent seems to be a deliberate obfuscation on his part and reflects poorly on him.
Applying a presumption of regularity, the standard settlement period for a contract for sale of land in New South Wales is 42 days from exchange. By reference to that assumption, if the exchange took place on 22 February 2022, that would place settlement on or about 5 April 2022.
However, and as submitted for the applicant, I have no evidence before me to suggest that the time for settlement has not been abridged and given the fact that the respondent seems to be conducting himself in a somewhat furtive manner, indicating that perhaps he wishes the funds for his own purposes, it remains distinctly possible that the settlement period could have been curtailed.
Even assuming that it has not been abridged, subject to some recission of the contract, the risk of disposal of the Busby property seems a certainty. Of course, there remains a prospect that despite his conduct to date in these proceedings and surrounding the sale of the Busby property, the respondent simply intends to retain his share of the proceeds of sale for the benefit of his creditors. However given the sensible regime proposed in the 1 March 2022 letter by the applicant in relation to the keeping of those funds and that the respondent wholly failed to reply thereto, on the other evidence before me I consider that prospect that the respondent intends to hold those funds to be slim given that it is inconsistent with the respondent’s conduct thus far: see Ewert v Martin at [22].
From this it follows a strong inference that the respondent will attempt to dissipate the proceeds he receives from the sale of the Busby property and this also weighs in favour of the granting of relief under s 50 of the Act.
In relation to prejudice to the respondent, this requires a balance between achieving the purpose of s 50 of the Act, which is related to considering the interests of the creditors, having regard to the purpose of s 50 without unnecessarily prejudicing the respondent. Generally speaking, the making of the order has the effect of achieving the purpose of the Act, being the protection of the remaining assets of the respondent debtor for distribution to creditors upon the making of a sequestration order.
The act of bankruptcy is not presently in doubt. There is no suggestion that the judgment debt which grounded it and led to the Creditor’s Petition has not been paid and, in fact, the evidence before me is that it has not. The judgment debt was in the vicinity of $350,000. The property has sold for $780,000. Assuming, again, because of the limited evidence available regarding the sale of the Busby property that as a joint tenant the respondent is entitled to at least half if not all of the proceeds of sale, that there will likely be agent’s commission, marketing costs and costs associated with any conveyance, the amount to which the applicant would be entitled may only just cover the amount the subject of the Creditor’s Petition, and that is without any regard to the fact that there is a mortgage to the Westpac Banking Corporation, the amount of which is presently unknown.
Accordingly, while the orders which prevent the respondent from dealing with all of his property may be inconvenient to him, it seems likely that at least in relation to the Busby property the proceeds from sale may not even be sufficient to satisfy the debt in the Creditor’s Petition. This is not a case where the proceeds of sale so exceed the debt that the Court would consider that the prejudice to the respondent was disproportionate to the aim of securing assets for distribution.
Given that there has been non-compliance with the Bankruptcy Notice, no attempt of which I am aware to set it aside, and that with the Creditor’s Petition imminently listed for hearing the respondent sought to dispose of a major asset surreptitiously, without the orders being made the objects of the Act would be thwarted. There is also nothing before me to indicate that the sequestration order is unlikely to be made.
As part considering any prejudice to the respondent, I have also turned my mind to the prejudice to Ms Kreidie with whom the Busby property is owned with the respondent as joint tenants. Ms Kriedie is not a party to these proceedings and accordingly I have little evidence before me about what, if any, prejudice may be suffered by her. However, as previously observed, the respondent is on notice of today’s interim application, and I was informed from the Bar table today that the solicitor for the respondent notified the respondent via both Ms Kriedie and his aunt yesterday of the time, date and place for today’s hearing in circumstances where the respondent himself does not speak much English.
I am satisfied that steps have been taken to make the respondent aware of today’s hearing and for whatever reason chose not to attend. In those circumstances, and in circumstances where the email address provided for the respondent is, in fact, that of his wife, it was submitted to me by Counsel for the applicant that not only having spoken to the respondent’s solicitors but agreeing to accept service or at least be the conduit for correspondence sent to the wife’s email address that she is not only aware of today’s proceeding but also will be aware of any orders made, and, in that regard, to the extent that she may have her own claim or may wish to seek to intervene in these proceedings or seek leave of the Court to exercise any liberty to apply or speak and liaise with the trustee in relation to the property of the respondent, that the trustee would be open to dealing with her.
In this regard, and if there was some particular prejudice to the respondent or to Ms Kriedie that they may wish to bring to the Court’s attention, today was an opportunity to raise it. There has been no substantive appearance for or by the respondent or Ms Kriedie.
Given the weight that I have already given to the other factors in the exercise of my discretion but, in particular, the risk of dissipation of assets and the interests of the creditors, I do not presently give much weight to the prejudice to the respondent’s wife. Aside from having limited material as to what this prejudice might be, I am also satisfied that the other factors presently outweigh this consideration. I am further satisfied that the respondent’s right to seek damages will be sufficiently preserved by the undertaking which has been given by the applicant via his Counsel today and that by granting liberty to apply the respondent and Ms Kriedie can approach the Court should they wish to seek a variation of the orders.
Accordingly, any prejudice to the respondent or to his wife is, in my view, outweighed by the interest of the creditors and the achievement of the purpose of s 50 of the Act and I am satisfied that the orders sought by the applicant should be made.
I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Given. Associate:
Dated: 18 March 2022
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