Duyker v Official Trustee in Bankruptcy Qld

[2003] FMCA 463

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DUYKER v OFFICIAL TRUSTEE IN BANKRUPTCY QLD & ANOR [2003] FMCA 463

BANKRUPTCY LAW – Application to annul – sequestration judgement – Applicant seeks to go behind judgement – no evidence of solvency – application dismissed.

First Applicant: JOHN THEODORE DUYKER

First Respondent: OFFICIAL TRUSTEE IN BANKRUPTCY QUEENSLAND

Second Respondent: BRUCE SYDNEY WALTER

File No: BZ 323 of 2003

Delivered on: 14 October 2003

Delivered at: Brisbane

Hearing date: 7 October 2003

Judgment of: Baumann FM

REPRESENTATION

Applicant: Self represented

Solicitors for the First Respondent: Tucker & Cowen

Second Respondent: No appearance

ORDERS

1. That the application be dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BZ 323 of 2003

JOHN THEODORE DUYKER

First Applicant

And

OFFICIAL TRUSTEE IN BANKRUPTCY QUEENSLAND

First Respondent

BRUCE SYDNEY WALTER

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. The applicant, JOHN THEODORE DUYKER, seeks an order that his sequestration be annulled pursuant to section 153B of the Bankruptcy Act 1966 (“the Act”). The first respondent, THE OFFICIAL TRUSTEE IN BANKRUPTCY QUEENSLAND “(the Trustee”), made submissions however the Trustee will abide the order of the Court.

2. The Second Respondent, BRUCE SYDNEY WALTER (“Walter”), was the petitioning creditor, and seeks that the application be dismissed.

3. The applicant represented himself.  He expressed, during the course of the hearing before me, some difficulties in articulating his case – in his words he was “out of his depth”.  An application was made for an adjournment to enable him yet again, to get further legal advice.  That application was opposed by the respondents.  For the reasons given ex tempore at the time, including my concerns about payment of the costs of the first respondent “thrown away” by another adjournment, the application for an adjournment was dismissed.

History

1. The applicant alleges that his difficulties all flow from a litany of poor advice and attention by solicitors, including in particular the second respondent.  The founding judgment is an order for costs made by default by the Tweed Local Court on 7 May 2002.

2. The relevant history is not contested.  In October 2000, Walter was retained by the applicant to act as his solicitor, primarily in a matrimonial property dispute pending before the Family Court of Australia.  As the matter progressed towards trial, Walter formed the view that the applicant had not provided him with truthful instructions.  It is not possible for me in these proceedings to confidently adopt the view of the solicitor, Walter, that the applicant had in fact committed “perjury”.  Walter terminated his retainer, a consequence of which was that he regarded himself as not bound by a previous arrangement for fixing costs of the upcoming trial.  Not surprisingly a dispute as to costs arose – and after the applicant quite rightly sought a bill of costs in taxable form, the solicitor had one prepared and delivered on 31 January 2002 together with the appropriate Notice of Rights required by order 38 rule 38(2) of the Family Law Rules.

3. In default of opposition to the bill of costs, judgment was obtained in the Tweed Local Court.  Despite retaining further solicitors, who filed, it would seem, an application to set aside the judgment.  That application was dismissed on 9 July 2002 for want of prosecution.  Bankruptcy proceedings then ensued and after service of the Bankruptcy Notice, the then solicitors for the applicant Messrs Egan Simpson wrote to Walter on 8 August 2002 saying inter alia that:

   “We advise that our client disputes that there is a need for such a notice to be filed by you, given that our client’s financial circumstances are solvent and he is in a position to meet any or all his debts.  Further and in addition, whilst we are aware that judgment has been issued by the Tweed Heads Local Court on your behalf in the sum of $13,900 any amounts owing in relation to this matter could be paid by Mr Duyker from any proceeds of sale which he received from the sale of the property located at Lot 3 Hawkins Lane, Eviron.  We advise that our office acts on behalf of both Mr & Mrs Duyker in relation to the conveyance and as such there would be no reason why an agreement could not be reached that any monies owed to you, could not be paid from the proceeds received by Mr Duyker.”

4. No agreement to pay was reached and despite putting Walter on notice that an application to set aside the Bankruptcy Notice would be made, no such application was made, nor did the applicant oppose the creditor’s petition when the matter came before a Registrar of this Court to consider sequestration on 6 December 2002.  As a result sequestration was ordered on that day.

5. The applicant says that he was again let down by his solicitors at the time and was unaware of the consequences which flowed from not attending court after service of the second petition upon him personally on 13 November 2002.

Legislation

1. Section 153B of the Act provides simply that:

   153B.  If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.

   [S 153B am Act No 44, 1996, s 3 and Sch 1.]

2. The court is required to adopt a two stage analysis, firstly to consider if a sequestration order should have been made and secondly, whether in the exercise of its discretion the bankruptcy should be annulled (see Re: Deriu (1970) 16 FLR 420).

Consideration

1. The applicant contends that the petitioning creditor was not, in truth, a creditor of the applicant.  His affidavits seek to encourage this Court, at this stage of the bankruptcy process, to “go behind the judgment”.  His plea is sworn to in the affidavit I gave him leave to file and rely upon at the hearing, in the following words:

   “I say that as a result of Bruce Walter’s unprofessional and deceitful methods in having this Bankruptcy Claim succeed reflects on the Legal System as a Travesty of Justice.  I therefore request that this Bankrupt Estate against myself be annulled.  My health, family, business and social life have been scarred to a point of no return …”

2. Whilst a court exercising jurisdiction in bankruptcy may go behind the judgment to ascertain whether a debt, in reality exists, the onus to persuade the Court to do so at this time rests upon the applicant (see Wren v Mahony (1971) 126 CLR 212.

3. The applicant has not persuaded me to do so.  He has had at least five separate opportunities to raise these issues in a court:

   -upon receipt of the Bill of Costs

   -after service of the Local Court debt summons

   -upon his application to set aside the default judgment

   -after the service of the Bankruptcy Notice

   -upon the hearing of the creditor’s petition

4. His failure to do so adequately, and the history of the matter (including the admission contained in the letter of 8 August 2002) draws me to the inevitable conclusion that the sequestration order ought to have been made.

5. The Statement of Affairs of the applicant signed 6 March 2003 and the affidavit of Roderick Munford sworn 1 October 2003 demonstrates that the applicant is insolvent, within the meaning of the Act.

6. Whilst he raises in submissions, queries about the liability for the default tax assessments raised by the Commissioner of Taxation (as a result of his directorship of a failed local sporting club), and the equity in his Banora Point home, no compelling evidence of solvency was offered by the applicant.  This is a significant factor mitigating against an order for annulment (see Layton v Westpac Banking Corporation (2000) 181 ALR 603; Cottrel v Wilcox (2002) FCA 1115).

7. For these reasons, the application must be dismissed with costs, such costs to have priority over the unsecured creditors.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Baumann FM

Associate: 

Date: