Edwards v SC Australia Pty Ltd - [2007] FMCA 1249

FEDERAL MAGISTRATES COURT OF AUSTRALIA

EDWARDS v SC AUSTRALIA PTY LTD

[2007] FMCA 1249

BANKRUPTCY – Review of Registrar’s Sequestration Order – relevance of debtor’s potential claim against co-debtor – application dismissed.

Bankruptcy Act 1966, s.52
Supreme Court Act 1986, s.52

Hadkinson v Hadkinson [1952] P 285

Applicant:

WALTER PERCIVAL EDWARDS

Respondent:

S C AUSTRALIA PTY LTD

(ACN 098 422 612)

File number:

MLG 396 of 2007

Judgment of:

McInnis FM

Hearing date:

25 July 2007

Delivered at:

Melbourne

Delivered on:

25 July 2007

REPRESENTATION

Applicant Debtor:

In person

Counsel for the Respondent Creditor:

Mr D.A. Klempfner

Solicitors for the Respondent Creditor:

De Wet Partnership

ORDERS

That the Application for Review filed 6 June 2007 be dismissed.
That the Applicant Debtor pay the Respondent Creditor's costs to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 396 of 2007

WALTER PERCIVAL EDWARDS

Applicant Debtor

And

S C AUSTRALIA PTY LTD

Respondent Creditor

REASONS FOR JUDGMENT

(Revised from Transcript)

This is an Application for Review filed by Walter Percival Edwards (the Applicant Debtor) on 6 June 2007 seeking review of orders made by a Registrar of this Court on 17 May 2007. On that day the learned Registrar made the following orders:
“1.A sequestration order be made against the estate of WALTER PERCIVAL EDWARDS.
2.The applicant's costs of and incidental to the petition be taxed pursuant to Order 62 of the Federal Court Rules and paid in accordance with the statute.”
In the order, the Registrar notes that the date of the act of bankruptcy is 22 March 2007. The Sequestration Order was made upon the petition of S C Australia Pty Ltd, a Creditor. A Creditor’s Petition was filed on 30 March 2007. To understand the current application for review, it is necessary to consider the chronology of events leading to the Sequestration Order. Before doing that, however, it is to be noted that in the Application for Review, the Applicant Debtor applies for the following orders:
“1.That the sequestration orders made on 17 May 2007 be set aside.
2.That proceeding no. MLG 396 of 2007 be consolidated with the Kyriackou Bankruptcy Notice.
3. Such further or other orders as the Court deems fit.”
The chronology of events to some extent is revealed in the Creditor’s Petition which somewhat unusually has a number of annexures. The significant annexure though, in my view, is a certified extract of an order made on 2 October 2006 in favour of the Respondent Creditor against the Applicant Debtor in the sum of $29,750.00. It would appear from the Creditor’s Petition that the events leading up to the entry of judgment on that date in the State Magistrates Court firstly arose from the execution of Terms of Settlement which, it is not disputed, had been duly executed by the parties and dated 27 April 2006.
It is not necessary for the Court to analyse in further detail the Terms of Settlement, nor indeed in great detail the facts and circumstances leading to those terms, save to note that it appears to be common ground that at all material times, the Applicant Debtor was a director of a company known as MK River Pty Ltd. It is not disputed that he had in fact signed Terms of Settlement arising out of a contractual dispute between that company and S C Australia Pty Ltd.
What happened after the Terms of Settlement, according to the documents annexed to the Creditor’s Petition, is that minutes of consent orders were apparently executed by the relevant parties in the State Magistrates Court proceedings on 14 September 2006. It is those minutes which were apparently relied upon by the Creditor when obtaining the judgment to which I have referred. The extract of the judgment was then appropriately annexed to a Bankruptcy Notice issued on 25 January 2007.
It is not disputed the Bankruptcy Notice was served upon the Applicant Debtor on 28 February 2007. It is the Bankruptcy Notice annexing the certified extract of order which then was relied upon in the Creditor’s Petition which I have indicated was filed on 30 March 2007. As I understand it, the Creditor’s Petition was served on 10 April 2007. It is important then to understand, by way of further background, what occurred after the petition was issued.
An affidavit of Aida Lee, relied upon by the Creditor, and sworn 20 June 2007 provides what appears to be uncontradicted material concerning the sequence of events. It would appear that a hearing before the Registrar occurred on 17 May 2007. On that date the Applicant Debtor attended the hearing, though had not entered an appearance, had not filed a notice stating any grounds of opposition to the petition, nor did he file any affidavit material setting out grounds for then seeking an adjournment of the bankruptcy proceedings. The Registrar made the orders which I have set out earlier in this judgment.
It would appear that the Respondent Creditor then ultimately received a copy of this Application for Review and, I assume, the affidavit in support. The Applicant Debtor has relied upon an affidavit in support of this application for review which was sworn by him on 6 June 2007. That is a detailed affidavit which attaches a number of further exhibits, the most significant of which appears to be an exhibit marked “WPE 3”, which itself is a copy of an affidavit sworn by the Applicant Debtor on 26 April 2007 and filed in Federal Court proceedings VID 210 of 2007. That affidavit also annexes a significant number of exhibits.
There are a number of preliminary matters which should be noted in an application of this kind. The first important issue to note is that an Application for Review of this kind is a hearing de novo. Accordingly the Court needs to be satisfied on an application of this kind, as it would when hearing a Creditor’s Petition, that the requirements of the Bankruptcy Act 1966 (the Bankruptcy Act) have been met, including those matters required by s.52 of the Bankruptcy Act.
The Respondent Creditor has provided this day updated affidavits of debt and search. It is noteworthy in the present case that no issue appears to be taken in relation to those matters required to be proved pursuant to the provisions of the Bankruptcy Act. In my view that concession is made appropriately as I am satisfied that the requirements of the Bankruptcy Act have indeed been met in this matter. What appears to be in issue, however, and is raised in the affidavit material relied upon by the Applicant Debtor, is a dispute that he appears to have been engaged in with a former employee namely, Mr Kyriackou.
Whilst a great deal of detail is referred to both in the affidavit of 6 June 2007 and the annexures to that affidavit concerning complaints which I am satisfied the Applicant Debtor genuinely has against Mr Kyriackou, it appears to me that whilst Mr Kyriackou may be regarded as a person who, as with the Applicant Debtor, has obligations to the Respondent Creditor, the material relied upon by the Applicant Debtor does not address, nor effectively seek to challenge in any way, the judgment against him which has been the foundation stone of the Bankruptcy Notice and subsequently the Creditor’s Petition.
Again perhaps somewhat unusually, it would appear that both before this Court and before the learned Registrar, the Applicant Debtor did not seek to challenge that an act of bankruptcy had occurred, nor before the Registrar did the Applicant Debtor seek to raise specific grounds opposing the Sequestration Order. No issue had been taken in relation to service, nor indeed any other irregularities in relation to the Bankruptcy Notice or the Creditor’s Petition.
It is also not in dispute that no proceedings have been taken at all by the Applicant Debtor to set aside the Magistrates Court order which presumably was based upon the minutes of consent order annexed to the Creditor’s Petition to which I have already referred. Again, it is not necessary for the Court to refer in detail to that document, save to note that before the Court this day the Applicant Debtor has sought to assert that the signature which appears in the minutes of consent orders purporting to be his signature is not his signature and, he claims, is a forgery.
He makes that claim in part from the bar table based upon his assertion that on 11 September 2006, the Law Institute of Victoria appointed a practice manager to the legal practice of the Applicant Debtor who was then a practicing solicitor engaged in his own sole practice. He argues from the bar table that under those circumstances, given the appointment of a practice manager on 11 September 2006, he would not have then duly executed the minutes of consent orders which, as I indicated earlier in this judgment, appear to have been executed on 14 September 2006.
There are a number of observations which should be made in relation to that assertion. The first in my view is that the assertion, apart from not being the subject of evidence properly adduced before this Court is an assertion upon which the Court would not be prepared to place any weight whatsoever, is nevertheless an assertion which I find implausible. It is not plausible in my view to retrospectively assert that a signature appearing on a document which has at least been known to the debtor since the date of service of the Creditor’s Petition was not his signature.
To the extent that the Applicant Debtor may have sought further time to adduce further evidence, in my view, having regard to the chronology of events, the failure of the Applicant Debtor to raise this issue when given the opportunity before the Registrar on 17 May 2007, combined with the fact that the service of the Creditor’s Petition occurred on 10 April 2007, encourages the Court to refuse any application for further adjournment to provide the opportunity to the Applicant Debtor to adduce further evidence. To the extent that an application of that kind was made, it is refused for those reasons.
In matters of this kind, Counsel for the Respondent Creditor has properly drawn the Court's attention to the authority of Hadkinson v Hadkinson [1952] P 285 and, in particular, the passage which appears at p.288 where Romer LJ states:
“It is the plain and unqualified obligation of every person against, or in respect of whom, an order is made by a court of competent jurisdiction, to obey it unless and until that order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void…”
In the present case, whilst I accept that the Applicant Debtor may be genuinely aggrieved as a result of the entering of a judgment based upon the minutes of consent order which in turn followed the Terms of Settlement, the execution of which I note is not in dispute, in my view the Court is left with the following conclusion which is not contradicted on the material before it namely, that there is a regularly entered judgment in the Magistrates Court which has not been the subject of any challenge. It is therefore binding and is a judgment upon which the Respondent Creditor can properly rely both in the Bankruptcy Notice and in the Creditor’s Petition.
In the absence of challenge, and having regard to the absence of the assertion of any other ground in opposition to the Creditor’s Petition, I can see no basis upon which the Court can resist reaching a conclusion that the order made by the Registrar on 17 May 2007 was an appropriate order made in accordance with the evidence and pursuant to the relevant provisions of the Bankruptcy Act.
In the present case it is clear to me that the Applicant Debtor has what he would describe as a genuine grievance against Mr Kyriackou. I accept, as submitted by counsel for the Creditor, that there are rights which the Applicant Debtor may seek to pursue, or may have sought to pursue in the past, arising out of s.52 of the Supreme Court Act 1986. Those rights, however, do not detract from the right of the Creditor to rely upon a regularly entered judgment in support of a Bankruptcy Notice and then, upon there being an act of bankruptcy, which is not disputed in the present case, pursuing a sequestration order by way of a Creditor’s Petition before the Registrar on 17 May 2007.
For the sake of completeness, I should indicate that in the affidavit material before the Court relied upon the Applicant Debtor had sought an adjournment of these proceedings pending the outcome of proceedings which are apparently current before the Federal Court against Mr Kyriackou. Those proceedings had initially been listed for a hearing in July and, I understand from the parties, are now listed for further hearing in August. In my view, it is neither appropriate nor desirable for this Court to defer consideration of this application for review pending the outcome of those other proceedings. They are not matters which should be visited upon the Creditor adversely in the hearing of this application for review where the Applicant Debtor seeks to set aside the sequestration order made on 17 May 2007.
From the material before me, there is no issue raised in relation to the solvency of the Applicant Debtor. Indeed on a number of occasions the Applicant Debtor himself has asserted that he has not had the financial capacity to pay the debt, it is not disputed that the debt is outstanding and he did not dispute that the debt was outstanding before the learned Registrar. It is not disputed before this Court, to use his own words, that the petitioner has “done all the right things”. Accordingly, it follows for the reasons given that the Application for Review should be dismissed with costs.
Those orders then leave in place the Sequestration Order made by the Registrar on 17 May 2007 who I note has correctly identified that the date of the act of bankruptcy is 22 March 2007.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 25 July 2007