DuluxGroup (Australia) Pty Ltd v Hado
[2020] FCCA 1077
•7 May 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DULUXGROUP (AUSTRALIA) PTY LTD v HADO | [2020] FCCA 1077 |
| Catchwords: BANKRUPTCY – Proceedings in connection with sequestration – Petition and sequestration order – Hearing of creditor’s petition and form of sequestration order – Generally |
| Legislation: Federal Circuit Court (Bankruptcy) Rules 2016 (Cth), rr.2.02(3), 4.06(3) |
| Cases cited: Boutros v Santa Sabina College Ltd [2011] FCA 477 Martin v Commonwealth Bank of Australia (2001) 217 ALR 634 Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132 Totev v Sfar (2008) 167 FCR 193 Wren v Mahony (1972) 126 CLR 212 |
| Applicant: | DULUXGROUP (AUSTRALIA) PTY LTD ACN 000 049 427 |
| Respondent: | GEORGE MATTE HADO |
| File Number: | BRG 14 of 2020 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 9 April 2020 |
| Date of Last Submission: | 9 April 2020 |
| Delivered at: | Brisbane |
| Delivered on: | 7 May 2020 |
REPRESENTATION
| Solicitors for the Applicant: | Rostron Carlyle Rojas Lawyers |
| Solicitors for the Respondent: | Joseph Burke Law Pty Ltd |
ORDERS
The time within which to file an application for review of the decision of Registrar Belcher made on 20 February, 2020 is extended to 13 March, 2020.
The respondent file and serve any further affidavits upon which he intends to rely by no later than 4:00pm on 18 May, 2020.
The applicant file and serve any further affidavits upon which it intends to rely by no later than 4:00pm on 25 May, 2020.
The application for review of Registrar Belcher’s decision made on 20 February, 2020 is adjourned to 1 June, 2020 at 9:30am for hearing.
Both parties have leave to appear the hearing on 1 June, 2020 by telephone.
IT IS NOTED:
For the purpose of attending the hearing on 1 June, 2020 by telephone the following procedure must be undertaken:
(a)five (5) minutes prior to the time the matter is listed each party and legal practitioner, if any, must:
(i)dial: 1800 132 423; and
(ii)when prompted enter code: 171 991 0845#;
(b)hold the line until the name of this matter is announced in court;
(c)each participant must ensure that they and their surroundings remain totally silent until the name of this matter is announced in court.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 14 of 2020
| DULUXGROUP (AUSTRALIA) PTY LTD ACN 000 049 427 |
Applicant
And
| GEORGE MATTE HADO |
Respondent
REASONS FOR JUDGMENT
On 20 February, 2020 a Registrar of this Court made a sequestration order against the estate of the respondent, who for the sake of clarity I shall refer to as the debtor. The order was entered on 20 February, 2020 but amended on 21 February, 2020 to record the correct date of the act of bankruptcy committed by the debtor.
On 24 March, 2020, the debtor applied to review the Registrar’s decision. The petitioning creditor opposes the application. The resolution of the application is not straightforward not because the underlying facts are difficult, but because there has been a failure on the part of both parties to observe the relevant rules and law that applies to the proceedings.
First, some background. The evidence contained within the affidavit of Ellen Kate Nowland filed on 7 April 2020 satisfies me that on 8 July, 2019 the debtor was personally served with a complaint that commenced proceedings in the Moorabbin Magistrates Court. The petitioning creditor was the plaintiff and the debtor was the defendant.
The petitioning creditor obtained a default judgment upon that complaint against the debtor on 1 August, 2019 for $13,221.59 plus interest of $105.05 and costs of $1592.60. The nature of the claim stated in the judgment is “goods sold and delivered”.
A bankruptcy notice was issued on 14 October, 2019 and personally served on the debtor on 17 October, 2019. There is no dispute about service. Nor was there any dispute that the debtor failed to comply with the bankruptcy notice or satisfy the Court that he had an appropriate set-off or counterclaim by 7 November, 2019. The affidavit of Amy Webster filed on 10 January, 2020 is evidence that no applications were made by the debtor in respect of the bankruptcy notice in either the Federal Court of Australia or the Federal Circuit Court.
Accordingly, the debtor committed an act of bankruptcy on 7 November, 2019.
The creditor’s petition presently before the court was filed on 10 January 2020. There is no dispute that it was personally served on the debtor on 22 January, 2020.
The creditor’s petition came before the court on 20 February 2020. The affidavit of Ellen Kate Noland filed on 7 April, 2020 satisfies me that:
a)at about 8:50am on the morning of the hearing of the petition, the debtor’s solicitor sent an email to the registry of the Federal Circuit Court seeking an adjournment of the creditor’s petition;
b)the petitioning creditor’s solicitor attempted to telephone the debtor’s solicitor at 9:25am and again at 9:56am but was unable to make contact with him or any employee of his firm. She left voicemails on both occasions detailing the reasons for her call;
c)the petition came before a registrar of the Federal Circuit Court at 9:52am. The registrar was informed of the adjournment request email and was told that the petitioning creditor’s solicitor had attempted to contact the debtor’s solicitor on two occasions;
d)at 9:54am, the hearing of the creditor’s petition was stood out of the list to allow the registry to attempt to contact the debtor’s solicitor;
e)at 10:10am an email was sent from the registry of the Federal Circuit Court to the debtor’s solicitor seeking an alternative phone number to be provided and setting out that if no reply was received before the matter was called back before the registrar, orders could be made in the debtor’s absence;
f)at 10:43am the petition was recalled into court before the registrar. The registrar noted that no contact had been made with the debtor’s solicitor on the contact number provided by that solicitor and that there had been no affidavit evidence filed by the debtor to support his adjournment request; and
g)the registrar made a sequestration order against the debtor’s estate.
The debtor swears that he was unable to appear in Brisbane on 20 February, 2020 as he was subject to a community corrections order which prevented him from traveling interstate. He swears that “if I was able to attend the hearing, I would object to it on the basis that the court order being relied upon, being the court order of the Moorabbin Magistrates Court dates (sic) 1 August 2019 is in the process of being reheard. Bankruptcy proceeding should not occur until a decision is made about my application for a rehearing of this matter.”
On 13 March, 2020 the debtor applied to the Moorabbin Magistrates Court for a rehearing of the complaint upon which the default judgment was granted. The rehearing was fixed for 30 April, 2020. The debtor has not sought to place any evidence before me to suggest that the rehearing application was successful.
Consideration
The debtor’s application was made one day out of time. He contends that it is within time because he says time should be calculated from when the order was amended (i.e. 21 February, 2020). However, by rule 2.02(3) of the Federal Circuit Court (Bankruptcy) Rules 2016 an application for review of the exercise of a power of the Court by a Registrar must be made by filing an application within 21 days after the day on which the power was exercised. What the applicant seeks to review is the exercise of the Court’s power to make a sequestration order by a Registrar, not the Court’s power to amend an order for a typographical error. The exercise of the relevant power by the Registrar occurred on 20 February, 2020. Twenty-one days after 20 February, 2020 expired on 12 March, 2020.
No authority was cited to support the applicant’s proposition that time should be calculated from 21 February, 2020. I reject his submission in that regard. The debtor’s application is one day out of time. It is incompetent for that reason.
The debtor did not clearly apply for any alternative relief such as an extension of time within which to commence an application for review. When I asked the debtor’s solicitor what should happen if I came to the conclusion that the application was out of time he said that I should give the debtor some “consideration”. What was meant by that was not explained, but I assume that it was an indirect way of asking for there to be an extension of time. I asked the debtor’s solicitor to identify for me the source of my power to extend the time within which to make the application, he was unable to do so. Notwithstanding that, however, it seems to me that rule 2.02(3) of the Federal Circuit Court (Bankruptcy) Rules 2016 is a sufficient source of power to extend the time.
Ordinarily, I would be minded to grant the debtor an extension of time within which to file his review application. The delay is very minor and it seems the explanation for it was an incorrect view taken by his solicitor about the date from which the time limit commenced to run. However, as the petitioning creditor’s solicitor submits, one of the relevant matters when considering whether to extend the time within which to commence the application are the prospects of success of that application. That is to say, does the debtor have an arguable case on the review?
At this point, I reach a quandary. Let me explain.
In her written submissions, the solicitor for the petitioning creditor referred me to Totev v Sfar (2008) 167 FCR 193 in which Emmet J said (citations omitted):
13. In the case of a hearing de novo, however, the judge reviewing the order begins afresh and exercises for himself or herself any discretion exercised by the registrar. The parties commence the proceeding again, subject to any rules concerning the use of evidence adduced before the registrar. The hearing de novo involves the exercise of the original jurisdiction and the petitioner, in the case of a bankruptcy petition, must start again, call witnesses and make out the petitioner’s case (Harris v Caladine at 124).
14. Because the hearing of an application for review of a sequestration order is a hearing de novo, it would not be sufficient for the reviewing judge to be satisfied that the registrar made no error and simply to dismiss the application for review. The judge who hears the review application must hear the petition afresh and must be satisfied as to the matters referred to in s 52 of the Bankruptcy Act. Thus, the reviewing judge must herself or himself be satisfied with the proof of:
·the matters stated in the petition;
·the service of the petition; and
·the fact that the debt or debts on which the petitioning creditor relies is or are still owing.
The reviewing judge must also exercise afresh the discretions conferred by s 52(2).
15. In particular, unless the Bankruptcy Rules are waived, the judge must have the affidavits referred to in r 4.06 of the Bankruptcy Rules, which must be sworn shortly before the hearing. Except in the case of a review on the same day as the sequestration order was made, the affidavits relied upon before the registrar would not satisfy r 4.06. In the absence of fresh affidavits, it would be necessary that compliance with the Bankruptcy Rules be waived.
(my emphasis)
In the absence of an affidavit filed in accordance with FCCR 4.06(3) (three), the creditor’s petition must fail: Boutros v Santa Sabina College Ltd [2011] FCA 477; Martin v Commonwealth Bank of Australia (2001) 217 ALR 634 at [8] – [9].
The petitioning creditor’s solicitor argued that the affidavits filed pursuant to FCCR 4.06(2) and 4.06(3) were sufficient for the purposes of this rehearing. Having regard to Totev v Sfar (above), that is plainly not the case. The petitioning creditor’s solicitor did not seek a waiver of compliance with the rules and only suggested that an affidavit of search would be filed if I wanted such an affidavit to be filed. However, it is not for the Court to tell parties how to run their cases. Nor is it for a court or a judge to advise represented parties what material that party should place before the Court so as to secure a successful outcome in the proceedings then under consideration. Am I to give the same advice and make the same requests of the debtor’s solicitor?
If I was to permit an extension of time, the creditor’s petition must be dismissed because an essential requirement for the making of a sequestration order is missing. But, were it not for that deficiency in the petitioning creditor’s case, it would be appropriate to make a sequestration order. The debtor does not seek to prove that he is solvent. Rather, he seeks to demonstrate that the Court should refuse to make a sequestration order because if it went behind the judgment the Court would quickly conclude that there is no debt owing by the debtor to the petitioning creditor greater than $825.
The debtor’s solicitor draws my attention to Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132. In that case, the plurality (Kiefel CJ, Keane and Nettle JJ) approved and applied the observation of Barwick CJ in Wren v Mahony (1972) 126 CLR 212 at 224 - 225:
The Court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of [the petitioning creditor’s] debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
Their Honours later explained (citations omitted):
68. For the purposes of s 52 of the Act, a judgment may usually be taken to be sufficient evidence of a debt in that a judgment against a debtor in favour of a creditor obtained after a trial is, generally speaking, a reliable indication of the true state of indebtedness as between creditor and debtor. Indeed, such a judgment can usually be expected to provide the most reliable statement of the debt humanly attainable because the ordinary processes of the adversarial system provide a practical guarantee of reliability. The testing of the relative merits of a claim and counterclaim under the rigours of adversarial litigation will usually establish the true state of accounts as between the parties to the proceedings. Accordingly, a Bankruptcy Court will usually have no occasion to investigate whether the judgment debt is a true reflection of the real debt. But where the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability.
However, the debtor’s evidence does not establish any basis for going behind judgment. At best, the debtor swears that he is not indebted to the petitioning creditor and that the petitioning creditor “must have made a mistake” but there are no particulars and no explanation set out in the argument for why the Court should conclude that the petitioning creditor has made a “mistake”. He asserts that he has been “overcharged” by the petitioning creditor. But he does not swear to how much or in what way he has been overcharged.
The debtor’s solicitor submits that “there has clearly been a mistake by DuluxGroup Pty Ltd that has led to the value of the amount owed to my client being substantially inflated. My client asserts that the invoices don’t reflect the work or services that were actually provided. My client asserts that the work or services which were actually performed total $825. He asserts that there has clearly been a mistake made by DuluxGroup Pty Ltd.” However, the debtor’s evidence does not establish any of those matters.
If it is not already clear, the quandary to which I adverted earlier is this. If I permit the debtor an extension of time within which to file his review application, I must rehear the creditor’s petition. If I rehear the creditor’s petition, I must dismiss it because of the defect that I have identified earlier in the petitioning creditor’s case. In that sense, the debtor has very good prospects of success on the hearing of the creditor’s petition because of the deficiencies in the petitioning creditor’s case. That is a matter which tends very heavily in favour of granting the extension of time. However, were it not for that deficiency in the petitioning creditor’s case there seems to be no good reason on the evidence before me not to make a sequestration order. The debtor has committed an act of bankruptcy, does not purport to be solvent and has not demonstrated any good reason to go behind the judgment of the Moorabbin Magistrates Court.
However, if I was to grant the debtor an indulgence by granting an extension of time within which to commence his review application, it would seem appropriate to also grant the petitioning creditor an indulgence to file the missing affidavit of search. But if I was to do that, it seems that I ought also offer the debtor the opportunity to file any further evidence he might wish to file with a view to establishing that it is an appropriate case for the Court to go behind the default judgment.
Disposition
In the end, it seems to me inappropriate to visit upon these parties the missteps and misapprehensions of each of their lawyers. It is appropriate to grant the debtor an extension of time within which to commence the review application, permit the debtor to file any further affidavit material upon which he intends to rely to persuade the Court that it ought go behind the default judgment and to then permit the petitioning creditor the opportunity to file any further evidence upon which it intends to rely (including any statutory affidavits) in support of the petition. The petition should be adjourned for further hearing date to permit the parties to file those documents.
Finally, the debtor applies to have the matter transferred to the Federal Circuit Court at Melbourne. I decline that application. The application can conveniently be dealt with over the telephone. There is no suggestion that there should be any cross examination of any witnesses at this point and the parties provided written submissions to me for the purposes of the hearing to which these reasons relate. Any further hearing of the creditor’s petition can take place in Brisbane with each of the parties appearing by telephone. I doubt I will have the assistance of written submissions at that hearing as well.
Accordingly, I make the orders set out at the commencement of these reasons.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 7 May, 2020.
Associate:
Date: 7 May 2020
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