Emerald Komba v Aim Site Hire Pty Ltd
[2011] FMCA 401
•30 May 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EMERALD KOMBA v AIM SITE HIRE PTY LTD | [2011] FMCA 401 |
| BANKRUPTCY – Sequestration order – application for review of order of a Registrar – application dismissed. |
| Bankruptcy Act 1966 |
| McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 Osborn v McDermott (1998) 3 VR 1 |
| Applicant: | EMERALD KOMBA T/AS BORA HOMES AUSTRALIA |
| Respondent: | AIM SITE HIRE PTY LTD (ACN 113 725 483) |
| File Number: | MLG 449 of 2010 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 14 February 2011 |
| Date of Last Submission: | 14 February 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 30 May 2011 |
REPRESENTATION
| Counsel for the Applicant: | The applicant appearing in person |
| Counsel for the Respondent: | Mr Cafari of Counsel |
| Solicitors for the Respondent: | Messrs. Ward Taylor |
ORDERS
The application for review filed on 13 January 2011 be dismissed.
The applicant pay the respondent’s costs of the application for review, as agreed and failing agreement to be taxed on the Federal Court scale, to be paid out of the Estate with priority.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 449 of 2010
| EMERALD KOMBA T/AS BORA HOMES AUSTRALIA |
Applicant
And
| AIM SITE HIRE PTY LTD (ACN 113 725 483) |
Respondent
REASONS FOR JUDGMENT
The applicant seeks a review of Registrar Caporale’s decision of
22 December 2010 to grant a sequestration order as sought by the respondent creditor against the applicant. The matter has had a long and difficult history.
History of proceedings
A bankruptcy notice was issued on 23 December 2009 and served upon the applicant debtor on 25 February 2010. The bankruptcy notice relied upon a default judgment in the Magistrates Court of Victoria, entered on 13 May 2008. The underlying cause of action related to the hire of construction site equipment, such as a portable toilet.
On 29 March 2010, the respondent lodged a creditor’s petition relying upon a debt of $3,491.85 pursuant to the judgment from Magistrate Braun of the Magistrates Court of Victoria for the hire of goods and chattels. The total amount of the judgment was $4,203.09; however the sum of $1,669.37 had already been applied toward the debt (allegedly paid by Mr Mpota).
A Consent to Act Declaration was filed by the trustee on 29 March 2010.
On 20 May 2010 the applicant lodged a notice setting out grounds of opposition to the creditor’s petition, alleging that he did not owe the respondent any money and that the respondent’s claim in the state Magistrates Court was based upon an error in the respondent’s accounting and logistics system. On the same day the applicant lodged a brief affidavit stating that he had paid $3000, without being provided invoices, and that Mr Rashid Ismail Mpota had paid a further $1669.37, but in his view that sum was not due. Mr Mpota was the applicant’s business partner, at least during the time in which the cause of action allegedly arose.
Affidavits of search and debt were filed on 15 July 2010. The affidavit of search and debt sworn by Rosemary Morrison on 14 July 2010 refers to an amount owing of $3213.85, rather than $3,491.85. On 15 July Registrar Caporale gave leave to the respondent to amend the creditor’s petition from $3,491.85 to $3213.85, and the matter was adjourned to 16 August 2010, with a timetable for filing material.
On 6 August the applicant filed a further affidavit, effectively setting out the substance of his allegations from the previous affidavit and further stating that the hire of equipment, which were delivered to Lot 1007 Copeland Crescent, Point Cook and Lot 25 Woodland Rise, West Melton, was not his responsibility as they were not his jobs and that he was invoiced by mistake.
In his affidavit of 6 August 2010 the applicant states that on 20 March 2008 he had written to the lawyers for the creditor, alleging that all payments had been made and that no invoices were provided. This letter must have been before the default judgment was entered. The applicant then went on to discuss the previous attempts that were made to obtain a sequestration order against him. In the previous proceedings it was alleged that on 27 April 2009 the applicant was served with a bankruptcy notice, which he denied having received. The applicant also denied having engaged a solicitor to act on his behalf, with respect to the previous creditor’s petition.
On 9 August 2010 the applicant filed Points of Defence stating that Lot 25 Woodland Rise, West Melton and Lot 1007 Copeland Crescent, Point Cook, were not jobs which Bora Homes (Australia) were working on. The applicant purported to annex copies of his insurance schedule (the applicant says he had only one insurer during the period) which he alleged did not list either property. The list is not annexed to the affidavit on the file. The applicant alleges that the respondent has ‘supplied fake invoices for the Jobs that did not exists.’ However, although the affidavit does annex a number of letters and invoices, it is not clear whether these are legitimate invoices or alleged to be ‘fake’. Some of the invoices appear to have been paid whereas some do not.
On 12 August 2010 an Affidavit in Reply was filed by the Respondent annexing various affidavits the applicant had relied upon for the applicant’s re-hearing application.
On 16 August 2010 the hearing of the petition was adjourned, with Registrar Burns giving the applicant leave to file an affidavit addressing the decision of his Honour Magistrate Braun of 6 August 2010. A further affidavit of search and an affidavit of debt were filed by the respondent on the same day.
On 25 August 2010 the applicant filed a further affidavit which set out that he had appointed a new lawyer (having otherwise been unrepresented for this matter) and setting out the reasons for the delay in filing a further affidavit (as permitted by Registrar Burns in his Orders of 16 August 2010).
On 18 August 2010 the respondent filed an affidavit annexing portions of the transcript which they had sought to have transcribed. It is not clear on what date this transcript was made available to the respondent by Spark and Cannon.
A notice of appeal was lodged in the common law division of the Supreme Court of Victoria, appealing from the state Magistrate’s decision. That notice of appeal was filed 3 September 2010. Ultimately the appeal was abandoned and the matter returned before the state Magistrate for further hearing. The solicitor for the respondent appeared before Zammit AJ, on 21 September 2010, there was no appearance on behalf of the applicant, but there was a letter, dated 17 September 2010, from Starnet Legal, stating that the applicant did not wish to further proceed with this appeal. In the affidavit of 1 October 2010 of the solicitor, this is recounted, together with copies of judgments obtained by others against Bora Homes (Australia) from VCAT in June and August of 2010, totalling $119,299.90.
On the same day Registrar Hetyey adjourned the federal proceedings to 4 October 2010 and a further affidavit of search and an affidavit of debt were filed by the respondent.
The applicant filed another affidavit on 28 September 2010, effectively repeating the material set out previously.
On 1 October 2010 the respondent filed a further affidavit of search, an affidavit of debt and an affidavit in reply. The affidavit in reply set out the dismissal of the applicant’s appeal to the state Supreme Court, stating that the appeal was dismissed after the Court had received a letter from the applicant indicating that he did not wish to proceed with the appeal.
On 4 October 2010 Registrar Caporale adjourned the hearing of the petition to 25 October 2010. Orders were later made by Registrar Caporale on 22 October 2010 vacating the hearing date of 25 October 2010 and re-listing the matter for hearing on 26 November 2010.
On 11 October 2010 the applicant filed a Notice stating grounds of opposition setting out the following:
a)The [applicant] does not owe the underlying debt to the [respondent];
b)The [applicant] has paid any monies owing to the [respondent] and in the premises it is the [respondent] which is indebted to the [applicant].
c)The [applicant] is solvent.
On 26 November 2010 Registrar Caporale adjourned the hearing of the creditor’s petition to 22 December 2010. On the same day the respondent filed a further affidavit of search, an affidavit of debt and an affidavit in reply. The affidavit in reply set out the dismissal of the applicant’s application for re-hearing of the underlying judgment and providing leave to the applicant to amend its application to ‘include an application for a permanent stay of the judgment entered on 13 May 2008’, with a provisional hearing date of the amended application set down for 3 December 2010.
On 16 December 2010 the respondent filed a further affidavit in reply. The affidavit in reply set out the dismissal of the applicant’s amended application. The application for a stay was dismissed by consent, with a costs order.
On 22 December 2010 Registrar Caporale ordered a sequestration order against the estate of the applicant. On the same day a further affidavit of search and an affidavit of debt were filed by the respondent.
The current proceedings
On 12 January 2011 the applicant filed an Application for Review, a Form 12 Notice to Creditors and an Affidavit in support of his Application. The application simply seeks the setting aside of the ‘judgment order’.
In his affidavit filed the same day, the applicant again insists that he was not liable for the goods provided to Copeland Crescent, Point Cook, or Woodland Rise, West Melton, adding claims that the respondent had placed undue pressure upon him to collect money and that the lawyer involved had not properly fulfilled her professional duties. The applicant also stated that the partnership with Mr Mpota ended on 30 August 2009.
The apparent mystery as to the applicant’s connection to Lot 1007 Copeland Crescent, Point Cook, is explained by a contract annexed to the applicant’s affidavit of 12 January 2011. The contract describes Mr Mpota as the owner of that property, when entering into a building contract with Advanced Building and Engineering Proprietary Limited. The builder’s signature on the contract was witnessed by the applicant. The contract was entered into on 19 September 2006. On 14 February 2011 the provided a further affidavit, disputing invoices relating to Fetlock Drive, Truganina and Lot 78 Saddle Wynd, Truganina, and a further property at Wyndham Vale. These are fresh disputes in the affidavit material. In the most recent affidavit the complaints with respect to Point Cook property have not been repeated, but the complaints, with respect to Woodland Rise, West Melton, were repeated, along with annexed documents from the Melton Shire Council to evidence that Bora Homes (Australia) did not appear to have a certificate for building work at that site, at the relevant time.
The only evidence the applicant annexes to show that the partnership came to an end, was the de-registration date on a partial extract from the Consumer Affairs Register and Business Name Extract. No evidence was provided of notice to the respondent that the partnership ended or indeed notice to anyone.
The application for review was made on 12 January 2011, at which time subpoenas were issued to the Melton Shire Council and the National Australia Bank (‘NAB’). The NAB opposed the subpoena on the basis that they had no connection with the proceedings and that the subpoena was an abuse of process. It appears that in the interim the bank had moved against the applicant’s property, which is mortgaged. The applicant has two proceedings pending before VCAT, with respect to the NAB, a Supreme Court proceeding and a Court of Appeal proceeding. I struck out the subpoena against the NAB when the matter came before me, on the basis that it appeared to have no relevance to the issue before this Court.
On 14 February 2011 the applicant filed a further affidavit, again insisting that he was not liable for the goods provided to Copeland Crescent, Point Cook, or Woodland Rise, West Melton, adding that the respondent had ‘received payment by way of deception’ and further alleging that ‘Ilina Watson and Hassall’s litigation were negligent in allowing Rashid Mpota to sign on my behalf without my consent.’ This affidavit goes directly to the question of whether the applicant is bound by the settlement agreement with respect to the judgment debt.
The settlement agreement argument`
As a result of the proceedings on the previous creditor’s petition, the parties entered into an agreement with respect to the judgment debt. This agreement, relevantly, provided:
1. The [Respondent] issued proceedings in the Federal Magistrates’ Court of Australia at Melbourne, being proceedings No. MLG846/2009 (“the bankruptcy proceedings”).
2. The [Respondent]'s claim is for a debt due and payable by the [Applicant] for the hire of goods and chattels.
4. The [Applicant] agrees to pay the [Respondent] the sum of $6,677.47 inclusive of costs (hereinafter “the settlement sum”).
5. The [Applicant] pay the [Respondent] the settlement sum by instalments, of the sum of $1,669.37, the first instalment on the 22nd day of September 2009 and by further instalments of $1,669.37 on the 22nd day of each month thereafter commencing on the 22nd day of October 2009 until payment of the settlement sum in full.
…
7. In the event that the [Applicant] defaults in payment of the settlement sum or any of the instalments or any part thereof referred to above, the [Respondent] shall be at liberty to re-instate the proceedings against the [Applicant] on the day of that default for the following amounts:
i) $6,677.47 for the [Respondent]’s claim or such lesser amount as is then due after taking into account any payments made by the [Applicant].
ii) Interest on the sum of $6,677.47 or the balance outstanding from time to time from the date of issue of the proceedings herein until the entry of judgment at the rate from the time being fixed under s.2 of the Penalty Interest Rates Act 1983.
iii) legal costs of and incidental to the [Respondent] consequent upon the default of the payment of an instalment or any part thereof.
8. These Terms of Settlement may be produced to the Court as conclusive evidence of the [Applicant]’s consent to the reinstatement against him for all amounts then claimed by the [Respondent], in accordance with these Terms.
…
13. Save should there be a default by the [Applicant in the performance of these Terms, upon payment in full of the settlement sum the [Respondent] shall thereupon release and forever discharge the [Applicant] from all actions, claims, liabilities, demands of every description, costs and expenses of any kind arising out of or in connection with the claim and the proceedings, which the [Respondent] may now have or has had or may hereafter have against or in respect to the claim and the proceedings but for these Terms and this conditional Release.
The agreement was entered into on 21 September 2009. It is described as a deed executed “by, for and on behalf of the [Applicant]”. It appears that the agreement was signed by Mr Mpota, the applicant’s business partner and witnessed by the solicitor, Ms Irina Watson.
The payments described in the deed of settlement were not made, save for the first payment. However, the applicant brought proceedings to set aside the original judgment debt in the state Magistrates’ Court. This re-hearing application was issued in the Magistrates’ Court of Victoria on 9 July 2010. The applicant denies signing the deed of settlement, and it has become apparent that it is not his signature that appears upon the deed. The applicant also denies authorising any person to sign on his behalf.
The applicant states that he was not aware that the settlement agreement was signed on his behalf, until 21 September 2009. He alleges that he became aware of the bankruptcy proceedings during a hearing of the Victorian Civil and Administrative Tribunal (‘VCAT’) with respect to another matter around 15 July 2010. In his affidavit, the applicant states that the tax invoice with respect to Lot 1007 Copeland Crescent showed a contract date as 15 December 2006, but maintained that no invoices had been supplied to him between then and 19 June 2007. He annexes a large number of tax invoices with respect to the hire of chemical toilets and “crossings”.
The application to set aside the judgment of the state Magistrates’ Court was heard on 2 August 2010 and continued on 6 August 2010. In that court the applicant maintained that Lot 25 Woodland Rise, West Melton and Lot 1007 Copeland Crescent, Point Cook, were not jobs which Bora Homes (Australia) were working on. The applicant annexed copies of his insurance schedule (the applicant says he had only one insurer during the period) which did not show those sites as job sites for him. A copy of an affidavit, filed by the creditor’s financial controller, Mr Paul Carayannis, is annexed to the applicant’s affidavit, filed 9 August 2010. He swears to 24 invoices being raised and four credit notes being issued, annexing copies of the invoices and the monthly statement that was issued on 19 February 2008. The Copeland Crescent, Point Cook invoice was issued in July 2007. Similarly, the Woodland Rise, West Melton invoice was issued at that time. The Copeland Crescent and Woodland Rise invoices continued through to January 2008.
In the lead up to the deed of settlement being signed the solicitors apparently acting for the applicant, Hassall’s Litigation Services, wrote on 7 August 2009, stating that they act on behalf of Bora Homes and the applicant, putting forward a settlement offer. On 12 August 2009, they advised that they were having negotiations with a supporting creditor, the correspondence continued between the solicitors for the creditor and the applicant. Importantly, on 18 September 2009, Ms Wilson wrote to the solicitors for the respondent advising:
We now enclose the following: (1) terms of settlement executed by our client for your client’s consideration…
On the face of the letter it did not make it clear that the terms of settlement were not, in fact, signed by the applicant, but by Mr Mpota.
On 30 November 2009 Hassall’s Litigation Lawyers ceased acting for the applicant. On 31 August 2010 the solicitors for the respondent provided a copy of a transcript of the extract of proceedings before the state Magistrates’ Court. Oddly, the initial argument was whether or not the communications between the applicant and the solicitor were the subject of legal professional privilege, as alleged by the applicant through his lawyer on the day. The applicant was represented by Mr Squirrel of Counsel, although only on the limited issue of legal professional privilege. Not surprisingly, the learned state Magistrate found that in the context of the proceedings, the question of the instructions given to the solicitor, who arranged the settlement deed, were not subject to legal professional privilege in circumstances where the applicant was denying that the solicitor acted on his instructions.
At page 2 of the transcript, the state Magistrate concluded that the key issue was whether or not the applicant had acknowledged his debt to the judgment creditor, in the terms of the settlement deed and had agreed to pay the debt by instalments. Whilst this was a narrow point the state Magistrate heard evidence from the relevant witnesses, the applicant and the solicitor. The state Magistrate identified that the applicant denied giving his authority to anybody, with respect to the settlement deed or bankruptcy matter and, in particular, denied giving instructions to Mr Mpota who is, in fact, the signatory.
His Honour recounts the evidence of the solicitor that both the applicant and Mr Mpota came to see her for the purpose of getting legal advice with respect to two matters: one a prosecution by the Fair Trading Commissioner and the other the bankruptcy notice. Whilst the applicant denied having attended upon the solicitor for the purpose of seeking advice on the bankruptcy notice, the state Magistrate accepted the solicitor’s evidence. At the hearing the state Magistrate concluded that the solicitor would not have had access to the court file number for the first sequestration proceedings, had the applicant not provided the documents to her.
At the hearing before me the applicant argued that the solicitor could have had this information from Mr Mpota having received his mail and taking it to the solicitor without telling him. Importantly, the state Magistrate accepted the solicitor’s evidence that in her initial conference with the applicant and Mr Mpota, she was told she was entitled to take her instructions from, and contact, either of them in respect of both matters. The solicitor stated that they had given her Mr Mpota’s email address as a good means of contact. She also gave evidence that she had a telephone conversation with the applicant personally, in which he “gave her instructions as to the amount of money he could or was willing to pay, an amount of money that she should negotiate, a settlement for him”. The state Magistrate was satisfied that the solicitor, by this time, knew the voices of her clients and that she could distinguish between them and accepted her evidence in this regard.
The state Magistrate also noted that the solicitor
“being a legal practitioner, had noted these things down in her file. She was keeping notes of these events. For her to have kept notes which indicate these things happened, which are not true, means that she would have had to go to the extent of falsifying a record.”
His Honour went on to accept her evidence. The state Magistrate outlines at page 10 of the transcript, that whilst the solicitor did not specifically ask, she saw it within her authority to have Mr Mpota sign the deed of settlement. His Honour rejected the applicant’s evidence that he had no knowledge of these events at all.
As a result the state Magistrates’ Court concluded it would be a “complete waste of the court’s time and public resources,” to proceed to a trial in the matter.
On 11 October 2010 a notice of opposition was filed, wherein the applicant claimed that he did not owe the underlying debt, but, in fact, had overpaid the respondent and that he was solvent. In an affidavit in reply, filed on 26 November 2010, the solicitor for the respondent set out that a second hearing application in the state Magistrates’ Court was issued on 24 September 2010. The application was heard on 15 and 22 November 2010, when it was ultimately dismissed by state Magistrate Braun.
On 16 December 2010 the solicitor for the respondent provided a further extract from the recording of the proceedings before the state Magistrate. In argument on 3 December, at pages 19 to 20, the state Magistrate sets out that the agreement provided evidence as to whether or not the applicant had an arguable defence. At page 23 counsel for the applicant, during argument with respect to the stay of the original judgment, said:
I think my client is prepared, now, to pay the amount that he owes under the terms of settlement but, that’s right, he wants to avoid to be made bankrupt and it’s on that basis that he seeks the stay to be retrospective -
The argument on that occasion was, in substance, that the deed of settlement created a new right which satisfied the original judgment and, therefore, it was not open to the respondent to return to the original judgment in bankruptcy proceedings. Why, even if this were the case, it would be a basis for setting aside the original judgment is not at all clear to me. The state Magistrate was clearly of the view that there was “no possible arguable defence,” as he said at page 33 in his decision on 3 December.
It appears clear that the deed of settlement was an accord executory (see McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 and Osborn v McDermott [1998] 3 VR 1), in that it was not intended to discharge the rights and obligations until such time as its conditions were fulfilled. This is apparent from the schedule of payments and the clause at the end of the agreement, which provides for the discharge of rights and liabilities upon full payment having been made. This being the case, the respondent was entitled to either sue upon the accord agreement or repudiate in reliance upon the breach. In this case they chose the latter. In these circumstances the rights to pursue the claim under the judgment continued. This was also the view that the applicant took until today, as he brought proceedings to set aside the underlying judgment after the deed of settlement was entered into.
Conclusion
The question of whether or not the applicant gave his authority for the deed of settlement to be entered into is one that was the subject of a full hearing, with evidence before the state Magistrate and the subject of findings of fact. I am not persuaded that the applicant has shown a case for the proposition that the settlement agreement was entered into without his consent or knowledge having regard to the findings of fact, based on a hearing on the evidence by the state Magistrate. The matter has been the subject of proceedings before a court, evidence and cross‑examination, and a judgment dealing with those factual issues. There is an issue estoppel between these parties on that question of fact, namely, that a settlement agreement was entered into with the applicant’s authority and in accordance with his instructions.
In light of that factual finding it is difficult to accept that the underlying debt is not due and owing. To the extent that the applicant sets out his disputes as to the amounts, the fact that Mr Mpota had entered into building contracts for one of the sites, albeit in his own name rather than the partnership name, is significant. The applicant and Mr Mpota were partners. The fact that his partner was building on the site shows that the invoice for hire for that site is not completely unrelated to the partners. He would be liable for debts incurred on the partnership account by his partner. On the material before me I am not persuaded that the applicant has shown an arguable defence.
The applicant also maintained that he was solvent. However, in submissions he stated that if he were made bankrupt then there would be no money received by the respondent, as there was nothing to obtain. This is inconsistent with solvency. Similarly, the outstanding judgments against him in VCAT, and the proceedings by the NAB stand against the proposition that he is presently solvent. The applicant has not set out any details of his financial affairs, nor alleged he has met the outstanding judgment.
In the circumstances I dismiss the applicant’s application for review, on the basis that I am satisfied that a sequestration order ought to be made, and ought to have been made at the time the order was made by the Registrar.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Date: 30 May 2011
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