Deronjic v Debt Fix Pty Ltd

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Federal Circuit and Family Court of Australia

(DIVISION 2)

Deronjic v Debt Fix Pty Ltd [2022] FedCFamC2G 845

File number(s): PEG 135 of 2021
Judgment of: JUDGE LUCEV
Date of judgment: 14 October 2022
Catchwords:

BANKRUPTCY – Debt proposal agreement – whether obligations fulfilled – whether release from any further obligations - whether operative exclusion to discharge provisions - whether Court can terminate debt agreement where already terminated by Official Receiver - whether proposal to vary debt agreement - provisions for processing variation of debt agreement

BANKRUPTCY – Offences - necessary proof - time limitation - whether necessary proof of offences made out

PRACTICE AND PROCEDURE - Declaratory relief - whether conditions for declaratory relief met

PRACTICE AND PROCEDURE – Summary dismissal – whether legislative provisions relied upon able to be made out – whether reasonable prospect of success

PRACTICE AND PROCEDURE – Whether leave to file amended application – where no reasonable prospect of success – where no draft amended originating application – whether amendment futile - objects and overarching purpose of legislation

PRACTICE AND PROCEDURE – Time limitation on bankruptcy offences

WORDS AND PHRASES – “unless”

Legislation:

Bankruptcy Act 1966 (Cth) ss 30, 185E, 185EC, 185M, 185MC, 185N, 185NA, 185Q, 185QA

Bankruptcy Regulations 2021 (Cth)

Crimes Act 1914 (Cth) s 15B

Federal Circuit and Family Court of Australia Act 2021 (Cth) s 143

Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 2.01

Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 13.13(a)
Cases cited:

 Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; (1992) 66 ALJR 271; (1992) 59 A Crim R

Australian Securities and Investments Commission v Cassimatis [2013] FCA 641; (2013) 220 FCR 256; (2013) 302 ALR 671; (2013) 94 ACSR 623

Baronian v Potter Constructions Pty Ltd (1979) 22 SASR 215; (1979) 42 LGRA 219

Council of the Law Society of New South Wales v Levitt [2018] NSWCA 247

Krajniw v Newman (No 2) [2015] FCA 673

Leigh v Lillee (1860) 30 LJ Ex 25

Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118; (2010) 84 ALJR 612; (2010) 269 ALR 233

Division: Division 2 General Federal Law
Number of paragraphs: 59
Date of last submission/s: 25 October 2021
Date of hearing: 25 October 2021
Place: Perth
Counsel for the Applicant: Mr PG Brunner
Solicitor for the Applicant: Bailiwick Legal
Counsel for the Respondent: Dr R Collins
Solicitor for the Respondent: Chamberlains

ORDERS

PEG 135 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

IN THE MATTER OF NIKOLA DERONJIC V DEBT FIX PTY LTD
BETWEEN:

NIKOLA DERONJIC

Applicant
AND:

DEBT FIX PTY LTD

Respondent

order made by:

JUDGE LUCEV

DATE OF ORDER:

14 OCTOBER 2022

THE COURT ORDERS THAT:

1.The applicant’s application pursuant to r 7.01 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) for leave to…

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Details
Case
[2022] FedCFamC2G 845
Decision Date

CaseChat Overview and Summary

In the Federal Circuit and Family Court of Australia, Debt Fix Pty Ltd initiated proceedings against Mr Deronjic, seeking the dismissal of his application for summary judgment and the costs of the proceedings. The dispute arose from a Debt Agreement entered into between Mr Deronjic and Debt Fix, which was subsequently terminated by the Official Receiver due to a default. Mr Deronjic filed an application for summary judgment, alleging breaches of the Bankruptcy Act by Debt Fix, among other claims. The primary legal issues before the Court were whether the claims made by Mr Deronjic had a reasonable prospect of success and whether leave should be granted to amend the originating application.

The Court found that Mr Deronjic's claims under the Bankruptcy Act lacked particularity and specificity, making it difficult to discern the precise allegations against Debt Fix. Furthermore, the Court determined that the claims did not have a reasonable prospect of success as the Debt Agreement had already been terminated by the Official Receiver, and no challenge to this termination was made. Additionally, the Court considered the application for leave to amend the originating application, noting that such an amendment would likely not change the outcome of the case and could result in further prejudice to Debt Fix. The Court ultimately decided that granting leave to amend would not be appropriate and dismissed the proceedings.

The Court's decision was grounded in the lack of specificity in Mr Deronjic's allegations, the fact that the Debt Agreement had already been terminated, and the potential for further prejudice to Debt Fix if leave to amend were granted. Consequently, the proceedings were dismissed, and costs were awarded to Debt Fix.

Orders

Orders of the court

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Background

Background to the litigation

The Court had the benefit of written submissions from Debt Fix. No written submissions were filed or tendered on behalf of Mr Deronjic. The Court has also had regard to the transcript of the hearing of the Application in a Case.Facts The principal facts relevant to this matter are as follows:(a)Mr Deronjic signed a Debt Agreement Proposal and Explanatory Statement (“Proposal”) on or about 29 March 2017: First O’Donnell Affidavit at [8] and Exhibit GDO1, pp 3-7;(b)in the Proposal, Mr Deronjic provided information to his creditors to enable them to consider the Proposal and make a decision on whether to accept the Proposal: First O’Donnell Affidavit at [10] and Exhibit GDO1, pp 3-7, the essential terms of which were as follows:(i)175 payments of $125 on a weekly basis were to be made by Mr Deronjic to Debt Fix (as proposed Administrator of the proposed Debt Agreement) commencing 26 July 2017; (ii)the total amount of the payments offered by Mr Deronjic to his creditors was therefore $21,875 (“Total Amount Proposed”);(iii)the Proposal noted that it was expected that most of the Application Fee charged by Debt Fix would be paid by Mr Deronjic prior to the start of the Proposed Debt Agreement, leaving a residual balance to be captured in dividends; and(iv)if the Proposal was accepted by creditors, then the fees for Debt Fix, as Administrator, to administer the Debt Agreement (“Debt Agreement Administration Fee”) of $4,900 would be paid from the Total Amount Proposed;(c)a letter enclosing the Proposal (“Confirmation Letter”) stated that:(i)if Mr Deronjic did not pay the Application Fee in full by the time the Debt Agreement payments were due to commence on 26 July 2017 in accordance with the Proposal, then any residual amount owing would form part of the Proposal, and Debt Fix would be an unsecured creditor for the residual amount and be entitled to a proportionate distribution along with other unsecured creditors, from the Total Amount Proposed: First O’Donnell Affidavit at [12] and Exhibit GDO1 at [18]; and(ii)the Government charged a lodgment fee (“Lodgment Fee”) for the Proposal and that this would be paid by Debt Fix on Mr Deronjic’s behalf from payments made by Mr Deronjic to Debt Fix;(d)Mr Deronjic confirmed, in writing, that he had read, understood and agreed with all the information contained in the Confirmation Letter: First O’Donnell Affidavit, Exhibit GDO1 at p 18;(e)as at 29 March 2017:(i)the application fee of $1950 (“Application Fee”) was due and payable by Mr Deronjic in accordance with the Proposal;(ii)the Lodgment Fee had been paid by Debt Fix and was to be reimbursed by Mr Deronjic from payments made to Debt Fix;(iii)the debts owed to Debt Fix totalled $2,150 (“Debt Fix Debts”), being the sum of $1,950 for the Application Fee and the $200 Lodgment Fee; and(iv)Mr Deronjic had agreed that if the Proposal was approved by creditors and he had not paid the Application Fee in full by 26 July 2017 then any residual amount would be included in the Proposal and Debt Fix would be treated as an unsecured creditor entitled to a proportionate distribution from the Total Amount Proposed: First O’Donnell Affidavit at [14]-[15];(f)Mr Deronjic’s creditors subsequently approved the Proposal (“Debt Agreement”);(g)on or about 30 March 2017 Mr Deronjic replied “yes” to a welcome call which included words to the effect that between 30 March 2017 and 26 July 2017 any payments made by Mr Deronjic would be voluntary payments that would be used to first offset the Government’s Lodgment Fee and the Application Fee: First O’Donnell Affidavit at [15];(h)payments of $1,625.01 were made by Mr Deronjic towards the Application Fee and Lodgment Fee in three instalments prior to the Debt Agreement taking effect (“Voluntary Payments”), and as agreed by Mr Deronjic in the Proposal and the Confirmation Letter, the Voluntary Payments were used to first offset the Application Fee and the Lodgment Fee, and an amount of $528.03 remained outstanding as at 26 July 2017 when payments under the Debt Agreement commenced: First O’Donnell Affidavit at [17] and [19]; and(i)payments of $20,251.09 were made pursuant to the Debt Agreement by Mr Deronjic, with his last payment being made around 26 July 2020.Relevant provisions of the bankruptcy act

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Court further observes that insofar as Mr Deronjic alleges offences under ss 185EC(6) and 185MC(6) of the Bankruptcy Act those allegations are unspecified and unparticularised. Without such specification or particularisation neither Debt Fix nor this Court is able to discern precisely what is alleged against Debt Fix or any officer or employee of Debt Fix. In the circumstances, the bare allegations presently made have no reasonable prospect of success. Further, for the reasons set out at [37]-[45] above, and based upon the facts as principally set out in the First and Second Deronjic Affidavits and the First and Second O’Donnell Affidavits, no alleged offence under either of ss 185EC(6) and 185MC(6) of the Bankruptcy Act can be made out in these proceedings in any event, and there is therefore no reasonable prospect of success in relation to such alleged offences.Conclusion - summary dismissal The Court bears in mind the not insignificant caution to be exercised in deciding whether to summarily dismiss proceedings of this type, but nevertheless is satisfied that for the reasons set out at [29]-[46] above the Originating Application has no reasonable prospect of success. Subject to what is said below concerning Mr Deronjic’s application for leave to amend the Originating Application, it would ordinarily follow from the reasons set out at [29]-[46] above that an order would be made pursuant to rule 13.13(a) of the FCAFCOA GFL Rules that these proceedings be summarily dismissed.Leave to amend In the Response to the Application in a Case Mr Deronjic seeks leave to file an amended Originating Application and accompanying affidavits. No draft amended Originating Application or draft accompanying affidavits were filed with the Court or handed up at hearing by Mr Deronjic. Mr Deronjic’s submissions At hearing Mr Deronjic’s lawyer submitted that there had not had been time in the fortnight since his law firm were first instructed to prepare a draft amended Originating Application or draft accompanying affidavits. At hearing Mr Deronjic’s lawyer did not articulate particular grounds which might appear in any amended Originating Application, and in so far as in the course of submissions there was discussion in relation to any amended Originating Application the scope of that discussion did not indicate that any amended Originating Application would rely upon statutory provisions other than those provisions of the Bankruptcy Act referred to in the Originating Application (as set out at [10]-[15] above and discussed at [29]-[46] above), save for the very vaguest and fleeting of references to possible, but unparticularised, claims in contract or for misleading and deceptive conduct.Debt Fix’s submissions Debt Fix submitted that the Court should not grant leave to Mr Deronjic to amend the Originating Application for the following reasons:(a)the Originating Application was made in accordance with the Form B2, and pursuant to r 2.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (“FCAFCOA Bankruptcy Rules”), which provides in r 2.01(3) that an application filed in accordance with Form B2 must state each section of the Bankruptcy Act or Bankruptcy Regulations 2021 (Cth) under which this proceeding is brought, and the relief sought. As there is no merit to the bankruptcy claims and the only other proposed claims are non-bankruptcy claims, the appropriate course is for the proceedings to be dismissed and for Mr Deronjic to be at liberty to commence any other proceedings by way of a further application; and(b)Debt Fix will suffer prejudice if leave is granted, and to some extent prejudice has already been suffered by reason of Debt Fix having incurred significant expense in successfully applying to have the proceedings dismissed in the Magistrates Court of Western Australia (“WA Magistrates Court”), and then having to make an application (with supporting affidavits) to have these proceedings dismissed. There would be further prejudice if the Court were to grant leave to make further amendments, which have not been properly identified or articulated, because Debt Fix would then have to incur the further expense of reviewing the amended Originating Application and bringing any appropriate application of its own. The prejudice suffered by Debt Fix is not, however, one which might be adequately compensated for by a costs order, as there is no evidence Mr Deronjic has the financial capacity to comply with any costs order, a matter previously conceded by him: Vuleta Affidavit at [21], and therefore any costs order might be futile; and(c)the fact that Debt Fix will be prejudiced by a grant of leave to amend the Originating Application weighs against the exercise of the Court’s discretion to grant leave to amend. The appropriate course is that the Originating Application made in accordance with the FCAFCOA Bankruptcy Rules should be dismissed with appropriate costs orders and Mr Deronjic be at liberty to commence new proceedings in respect of any claim in contract or consumer law.Consideration – leave to amend

Ratio Decidendi

Legal Principle Established

Mr Deronjic made no particular argument with respect to s 185Q of the Bankruptcy Act.Consideration – summary dismissal As set out at [10]-[15] above the relevant statutory provisions relied upon in the Originating Application as the basis for a cause of action were ss 185N, 185NA, 185Q, 185EC and 185MC of the Bankruptcy Act, and those provisions, together with a related provision, namely s 185QA of the Bankruptcy Act, are discussed below in considering whether or not there is a reasonable prospect of success in relation to the Originating Application.Sections 185N and 185NA of the Bankruptcy Act In relation to ss 185N and 185NA of the Bankruptcy Act it was common ground that any relief to be obtained from this would be by way of a declaratory order under s 30(1)(b) of the Bankruptcy Act. Declaratory relief will not, however, be granted in relation to a purely hypothetical question, or if the relief claimed relates to circumstances which have not occurred or might never occur or if the declaration will produce no foreseeable consequences for the parties: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; (1992) 66 ALJR 271; (1992) 59 A Crim R, CLR at 582 per Mason CJ, Dawson, Toohey and Gaudron JJ. The Court has no doubt that, in an appropriate case, such a declaratory order might be made as to whether or not a person had discharged their obligations under a debt agreement for the purposes of s 185N of the Bankruptcy Act, or whether a person has been released from provable debts by reason of a debt agreement having ended under s185NA(1) of the Bankruptcy Act. This case is not an appropriate case for declaratory relief for three reasons set out hereunder. The first reason relates to s 185N(1) of the Bankruptcy Act. Section 185N(1) of the Bankruptcy Act provides that a debt agreement ends when all the obligations that it created have been discharged, “unless”, relevantly, the debt agreement has been terminated earlier under s 185QA of the Bankruptcy Act. The use of “unless” in s 185N(1) of the Bankruptcy Act excludes a debt agreement from ending thereunder where it has already been terminated under s 185QA of the Bankruptcy Act: Leigh v Lillee (1860) 30 LJ Ex 25 at 27-28 per Pollock CB; Baronian v Potter Constructions Pty Ltd (1979) 22 SASR 215; (1979) 42 LGRA 219, SASR at 218 per Walters J; Council of the Law Society of New South Wales v Levitt [2018] NSWCA 247 at [55] per McColl JA. Section 185N(1) of the Bankruptcy Act is therefore not engaged in circumstances where, as here, the Debt Agreement has already been terminated by the Official Receiver under s 185QA of the Bankruptcy Act by reason of the Official Receiver being satisfied that a six month arrears default on the part of Mr Deronjic had occurred. Second, no challenge has been made in respect of the validity of the termination of the Debt Agreement by the Official Receiver under s 185QA of the Bankruptcy Act, and the Official Receiver is not a party to the Originating Application. The Originating Application does not seek to set aside or review the Official Receiver’s termination of the Debt Agreement by the Official Receiver under s 185QA of the Bankruptcy Act, and when the effect of the termination of the Debt Agreement by the Official Receiver under s 185QA of the Bankruptcy Act was raised with Mr Deronjic’s lawyer at hearing there was no suggestion that any application seeking to set aside or review or invalidate the Official Receiver’s termination of the Debt Agreement by the Official Receiver under s 185QA of the Bankruptcy Act might be made.