Fang v Lin
[2024] FedCFamC2G 747
•19 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fang v Lin [2024] FedCFamC2G 747
File number: SYG 30 of 2024 Judgment of: JUDGE BINGHAM Date of judgment: 19 August 2024 Catchwords: PRACTICE AND PROCEDURE – BANKRUPTCY – interim application for an extension of time of one day for the filing on an application for review and stay of sequestration order made by a registrar – trustee appointed – prejudice to other persons – arguable case not supported by the evidence – balance of convenience not served by granting stay – other sufficient cause futile – application dismissed with costs Legislation: Bankruptcy Act1966 (Cth) s 5, 52(1) and 52(2)
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 256(1)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy Rules) 2021 (Cth) r 2.02
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 2.05, 21.04
Cases cited: Aon Risk Services Australia Ltd v ANU [2009] HCA 27
Ashwood v Ashwood [2024] FedCFamC2G 88
Bechara v Bates [2021] FCAFC 34; 286 FCR 166
Endresz v Australian Securities and Investments Commission [2014] FCA 1139
Murphy v Nyoni [2017] FCCA 143
Re Wardle, A.J. v Ex parte Widin, W.J. & ANZ Bank (resp) [1987] FCA 27; 70 ALR 633
Singh v Owners Strata Plan No. 11723 [2012] FCA 538
Division: Division 2 General Federal Law Number of paragraphs: 59 Date of last submissions: 12 August 2024 Date of hearing: 12 August 2024 Place: Melbourne (by videoconference) Solicitor for the Applicant: Bloomsbury Legal Counsel for the Respondent: Mr Pokoney Solicitor for the Respondent: Westlink Legal ORDERS
SYG 30 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: YANNA FANG
Applicant
AND: SHAO HUA LIN
Respondent
ORDER MADE BY:
JUDGE BINGHAM
DATE OF ORDER:
19 AUGUST 2024
THE COURT ORDERS THAT:
1.The application for a stay of the Orders of the Registrar dated 4 July 2024 sequestrating the estate of Shao Hua Lin be refused and the Interim Application filed 26 July 2024 as amended 5 August 2024 be dismissed.
2.Pursuant to r 2.02(3) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy Rules) Rules 2021 (Cth), the application for an extension of time for the Application for Review of a Registrar’s Decision lodged on 26 July 2024 is refused and the Application for Review be otherwise dismissed.
3.The scale costs of the Creditor and Trustee be paid from the estate of Shao Hua Lin.
AND THE COURT NOTES THAT:
A.The Orders of Registrar Ditton made on 4 July 2024 sequestrating the estate of Shao Hua Lin remain in full force and effect.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BINGHAM:
These proceedings come before me by way of an interim application filed by the debtor on 26 July 2024, as amended on 5 August 2024 (Interim Application). The debtor, Shao Hua Lin, (Debtor) seeks a stay not exceeding 21 days on all proceedings under the sequestration order of the Court made on 4 July 2024 pursuant to the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) (Sequestration Order). The Debtor also seeks an extension of time for the filing of an Application for Review of the Sequestration Order (Review Application).
BACKGROUND
On 8 May 2023 the Creditor, Yanna Fang, (Creditor) asked the Debtor to exchange Chinese Yuan into Australian Dollars for the purposes of paying off the Creditor’s home loan. The Creditor deposited 300,000 Chinese Yuan into the Debtor’s “Bank of Communications (Chinese Bank Account)”.[1] The amount deposited was equivalent to around $64,000 Australian Dollars.[2]
[1] Affidavit of Shao Hua Lin sworn or affirmed and filed 5 August 2024 (Lin Affidavit), [4]-[5].
[2] Lin Affidavit, [4]-[5].
The Debtor says that his Bank of China account was subsequently “frozen” because his Australian passport had expired. The Bank of China required that he “take your original valid identity card to our bank outlet for the confirmation of information updates as soon as possible to ensure the security of your account and fund”.[3] There is no evidence that the Debtor was required by the Bank of China to return to China to verify his identity.
[3] Lin Affidavit, Annexure “SHL-01 Tab 3”, ‘Chinese Bank Account Frozen Screenshot’, 7-8.
On 3 October 2023 the Creditor commenced proceedings in the General Division of the Local Court of New South Wales (NSW) to recover $71 368.81, being the deposited amount of $64,340 plus interest and costs, from the Debtor.[4] The Debtor now claims that he was not made aware of these proceedings at the time.
[4] Lin Affidavit, Annexure “SHL-01 Tab 4”, ‘Statement of claim’, 11-13.
On 13 November 2023 judgment was entered against the Debtor. The Local Court of NSW made orders against the Debtor requiring him to pay the Creditor the sum of $72,976.59 (Judgment Debt).
The Creditor commenced garnishee proceedings for the purpose of recovery of the judgment debt. On 24 November 2023 a garnishee order was made against the Debtor’s ANZ Bank account. The sum of $7,430.16 was paid pursuant to the garnishee order from the Debtor’s bank account.[5]
[5] Lin Affidavit, [11] and “Annexure SHL-01 Tab 6”, ‘Shao Hua Lin’s ANZ bank account statement’, 25.
On 27 November 2023 and 3 December 2023 the Debtor was served with a bankruptcy notice dated 27 November 2023. The debt claimed was in the amount of $65,546.43 (Bankruptcy Notice).
On 9 January 2024 proceedings were commenced in this Court by the Creditor via a Creditor’s Petition (Creditor’s Petition). The Creditor’s Petition sought sequestration orders pursuant to s 43 of the Bankruptcy Act against the estate of the Debtor. The Creditor’s Petition was filed on the basis that the Debtor owed the Creditor $65,546.43 with respect to the Judgment Debt and had not complied with the Bankruptcy Notice. On 3 February 2024 the Creditor’s Petition and documents relied upon were served on the Debtor.
On 12 March 2024 the Debtor filed a Notice stating grounds of opposition to the application, interim application and petition. Those grounds were:
1.The respondent had made $7,430.16 towards the creditor’s claim on 24 November 2023 by way of Garnish order.
2.The creditor’s petition was received on 3 December 2023.
3.Temporary difficulties in cash flow does not equivale bankruptcy.
4.The debtor is to make a further $5,000 payment towards the creditor.
5.The debtor is willing to make further payment by instalments by the 30 June 2024.
(As written)
The matter came before a Registrar of this Court on 14 March 2024, 18 April 2024, 16 May 2024 and 20 June 2024.
The Debtor made payments in instalments to the Creditor in both Chinese Yuan and Australian Dollars. The Creditor deposed that as of 3 July 2024 the remainder of the debt was $23,797.82.[6]
[6] Affidavit of Debt of Yanna Fang affirmed and filed 3 July 2024.
On 4 July 2024 the Registrar made Orders sequestrating the estate of the Debtor and for the Creditor’s costs in the amount of $7,020.31 to be paid from the Debtor’s estate. The Registrar found that the date of commission of the act of bankruptcy was 5 January 2024.
On 4 July 2024 Mr Jason Porter from SV Partners was appointed Trustee under s 164A of the Bankruptcy Act.
On 8 July 2024 the Debtor paid the Creditor $150,000 Chinese Yuan which equated to approximately $30,710.64 Australian Dollars. On 22 July 2024 the Debtor paid the Creditor $107.49. The parties do not dispute that the Judgment Debt has now been discharged by the Debtor. The Debtor contended that he has overpaid the Creditor $1,966.46 Australian Dollars more than the Judgment Debt required.
On 26 July 2024 the Debtor filed an Application for Review seeking:
1.The order made by Registrar Ditton on 4 July 2024 in proceedings SYG30/2024 be set aside, pursuant to s 256 of the Federal Circuit and Family Court of Australia Act 2021 (Cth).
2.The creditor's petition filed on 9 January 2024 be dismissed.
3.There be no order as to costs.
4.Direct creditor to take such steps as may be required to remove the debtor's name from National Personal Insolvency Index.
On 26 July 2024 the Debtor also filed an interim application seeking:
1.Under section 52(3) of the Bankruptcy Act 1966 (Cth), the Court may stay all proceedings under a sequestration order for a period not exceeding 21 days if it thinks fit. The sequestration order against Shao Hua Lin was made on 4 July 2024, and this has not exceed 21-day period till today.
2.Under r 25.04 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), a party bound by a judgment or order may apply to the Court for an order that the judgment or order be stayed
3.A stay is sought to be applied on the order made by the Registrar Ditton on 4 July 2024.
4.That the applicant provide the copy of the interim orders to the official receiver, Mr Jason Porter within two business days of these orders.
5.Any other orders, the court see fit
On 30 July 2024 this matter came before me for hearing of the Interim Application. The Debtor sought an adjournment for the purpose of filing an amended Interim Application and the filing of additional affidavit material. Counsel appeared for the Debtor, the Solicitor for the Creditor appeared and the Solicitor for the Trustee appeared amicus curiae.
On 30 July 2024 I made orders adjourning the hearing of the Interim Application and for the filing of further material.
On 5 August 2024 the Debtor filed an amended Interim Application seeking:
1. The orders made on 4 July 2024 be stayed until the earlier of the determination of the application for review filed in these proceedings, of further order of the Court.
2. The time for filing the application for review be extended to 26 July 2024, pursuant to r 2.02(3) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) or alternatively r 3.05 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
3. The costs of and incidental to this application be costs in the cause.
4. Such further or other order as the Court deems fit.
The Interim Application as amended was heard before me on 12 August 2024 by videoconference. Counsel appeared for the Debtor, the Solicitor for the Creditor appeared and the Solicitor for the Trustee appeared amicus curiae.
THE NATURE OF THE APPLICATION
Extension of time
The time for applying for review of the order of a Registrar is prescribed by r 2.02(3) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy Rules) 2021 (Cth) (Bankruptcy Rules). The application must be made within 21 days after the day on which the power was exercised.
Applications for review
A hearing under s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) seeking a review of a Registrar’s decision is a hearing de novo and the creditor’s petition is considered afresh. The review does not hinge, or focus, upon error in the decision of the Registrar[7].
[7] Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 21.04.
In a hearing de novo the petitioning creditor is the true applicant and carries the onus of proving the application by bringing forward the evidence required by section 52(1) of the Bankruptcy Act. The debtor/bankrupt does not need to show error in the Registrar’s decision. The only onus of the debtor/bankrupt who actively opposes the creditor’s petition is to prove either solvency or any other sufficient cause under section 52(2).
Accordingly, the petitioning creditor must prove, and the Court must be satisfied, that the requirements for the making of a sequestration order have been established: Bechara v Bates [2021] FCAFC 34; 286 FCR 166.
If the Court concludes that the making of a sequestration order is appropriate, the Court will dismiss the review application, leaving the Registrar’s extant order in place. For good order, the Court should confirm or affirm the Registrar’s extant order.
Granting a stay
Section 52(3) of the Bankruptcy Act confers a power to stay all “proceedings under a sequestration order”. That merits a number of observations. First, as Neaves J concluded in Re Wardle, A.J. v Ex parte Widin, W.J. & ANZ Bank (resp) [1987] FCA 27; 70 ALR 633 at [5] to [8]:
[A] sequestration order does not itself operate to change the debtor’s status or to vest his property in the trustee. The making of the sequestration order is but the factum upon which the statute operates to bring about the consequences upon the debtor's status and property. . . . [T]he operation which a sequestration order has is to trigger the statutory provisions which bring about the consequences of bankruptcy.
Beach J made the same point in Endresz v Australian Securities and Investments Commission [2014] FCA 1139 at [8]:
It is apparent from the provisions and operation of the Bankruptcy Act 1966 (Cth) (the Act) that it is inapposite to talk of a stay of a sequestration order as such. When a sequestration order is made, it takes immediate and automatic effect by force of the Act. There is an immediate vesting of property in the trustee in bankruptcy. Moreover, after-acquired property of the bankrupt vests as soon as it is acquired. See, generally, Nand v Fuji Xerox Australia Pty Ltd [2014] FCA 757 at [3] per Yates J. It is conceptually incoherent to contemplate a judicial stay order as being available to countermand automatic legislative operation where no question of invalidity is involved.
The usual principles apply when considering whether a stay should be granted in these circumstances before me. Namely whether there is an arguable point raised by the proposed appeal and whether the balance of convenience favours the granting of a stay: Singh v Owners Strata Plan No. 11723 [2012] FCA 538 at [29].
CONSIDERATION
Extension of Time to make the Application for review
Rule 2.03 of the Bankruptcy Rules provides that the Application for Review of a decision of a Registrar must be made in accordance with Form B3A and filed within 21 days of the decision. The Application for Review made by the Debtor was not made within the prescribed time under the Bankruptcy Rules.
My ability to extend the time to file the Application for Review is discretionary and will turn on the facts of each case.
In Ashwood v Ashwood [2024] FedCFamC2G 88 (Ashwood) Judge Manousaridis considered the factors that would have to be considered by a Court where a debtor had not filed an application for review within the time prescribed by r 2.02(3). At paragraph [52] his Honour expressed the following opinion:
A debtor’s right, on an application for review of a Registrar’s sequestration order, to a de novo hearing of the creditor’s application for a sequestration order depends on the debtor having made an application for review within the 21 day period prescribed by r 2.02(3) of the Bankruptcy Rules. Where, however, a debtor has not applied for the review of the Registrar’s sequestration order within the 21 day period, the debtor must seek an order from the Court that the 21 day period be extended. That would require the exercise of discretion, and would bring into play factors that would not be relevant if an application for review were made within the 21 day period. The Court would have to consider whether there is a reasonable explanation for the delay; the length of the delay, what actions persons have taken on the faith of the sequestration order and whether, having taken such actions, extending the time for making an application for review will cause prejudice to such persons; and also whether there would be any arguable point in the Judge’s hearing of the creditor’s petition, such as would merit extending the time for the making of an application for review of the sequestration order.
In Ashwood, his Honour found that the debtor had filed her Application for Review within the time prescribed by the Bankruptcy Rules. It is not the case here. The Amended Interim Application seeks an extension of time for filing of the Review Application. It is incumbent upon me to consider: whether there is a reasonable explanation for the delay, what is the length of the delay, what actions persons have taken on the faith of the sequestration order and whether taking such actions extending the time will cause prejudice to such persons and whether there would be any arguable point that would merit extending the time for making of an application for review of the sequestration order.
The Explanation for the Delay
The Debtor has been legally represented in the bankruptcy proceedings since 7 February 2024.[8] The Debtor relied upon representative error in the filing of the Application for Review. The Debtor’s lawyer filed documents electronically at approximately 4:01pm on 25 July 2024. The documents filed did not bear the distinctive number of the proceeding in which it was filed[9] and as such was rejected by the Registry at 8:32am on 26 July 2024. The Application for Review was re-filed by the lawyer for the Debtor at 10:40.03am on 26 July 2024 and was accepted for filing by the Registry at 10:51.02am.
[8] Notice of appearance: Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 form B4 filed by Shao Hua Lin on 7 February 2024.
[9] Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy Rules) 2021 (Cth), r 2.02.
What is notably absent from the explanation for delay provided, in circumstances where the Debtor had been represented since 7 February 2024, is evidence as to when instructions were given by the Debtor to his lawyers to make the Application for Review and why the Application for Review was lodged a mere half hour prior to the limitation period for filing expired. I am of the view that the circumstances that lead to the representative error are inadequately explained but accept that when the error was identified it was rectified reasonably quickly. In these circumstances the explanation for delay is a neutral factor with respect to my consideration as to whether I should grant an extension of time.
The Length of the Delay
The exercise of power by the Registrar, namely making of the Sequestration Order took place on 4 July 2024, 21 days from the date of the Registrar’s order was 25 July 2024. The Debtor’s Application for Review was lodged at 10:40.03am on 26 July 2024 and was accepted for filing, in accordance with r 2.05 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) at 10:52.02am on 26 July 2023. The extent of the delay was one (1) day. As submitted by the Debtor, I accept that the extension of time sought is indeed modest. The length of the delay being one day is a factor that I consider to be in favour of the exercise of discretion to grant the extension of time.
Prejudice
The Creditor submitted that she intended to take a “back seat” with respect to these interim proceedings as the debt to her had been paid in full.[10] My considerations with respect to prejudice must go beyond simply considering the petitioning creditor I must consider what actions persons have taken on the faith of the sequestration order and whether taking such actions extending time for review will prejudice those persons.
[10] Transcript P3:L13-24.
It is important that I set out some context for my considerations with respect to prejudice. The Debtor has been the author of delay in this matter. It is evident from the manner in which this interim application has been progressed by him:
(a)The Interim Application together with a supporting affidavit was lodged on 25 July 2024 at 7:37.14pm.
(b)The Interim Application was rejected by the Registry at 9.03.10am on Friday 26 July 2024 as it was not accompanied by a filing fee.[11]
(c)On 26 July 2024 at 11:10.35am the Lawyer for the Debtor lodged the Interim Application and supporting Affidavit together with the filing fee. The Interim Application was accepted for filing at 1:03.04pm.
(d)The Interim Application sought a stay of all the proceedings under the sequestration order but did not include an application for extension of time. The supporting affidavit annexed material that was in a language other than English and had not been translated.
(e)The Interim Application was listed before me on Tuesday 30 July 2024 for hearing. Counsel for the Debtor sought the adjournment of the Interim Hearing for the purpose of filing an Amended Interim Application and Supporting Affidavits (including translation of the annexures). The application for adjournment was not opposed.
(f)I granted the application for adjournment and ordered that the Debtor file an amended application and evidence in support be filed by 5 August 2024, with the interim application to be heard on 12 August 2024.
[11] Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), r 2.05(3).
The consequence of the delay at the behest of the Debtor resulted in the Trustee acting pursuant to the Sequestration Order and in accordance with his statutory duty since his appointment on 4 July 2024 some 39 days as of the date of the hearing of the Interim Application.
The Trustee has taken a neutral position with respect to this proceeding but has helpfully filed submissions and an affidavit affirmed 7 August 2024. No material was filed in response to the Trustee’s affidavit. Counsel for the Debtor accepted that there is a general prejudice to the body of creditors and the administration of insolvent estates which is a matter inherent to applications of this kind.[12]
[12] Transcript P12:L1-3.
It is apparent that apart from the petitioning Creditor, there are third party creditors that may be prejudiced by the granting of an extension of time namely and stay. The Australian Taxation Office with respect to seven (7) years of outstanding taxation returns (only filed on 2 August 2024), Westlink Legal Pty Ltd (the Debtor’s lawyers who is the Caveator under two Caveats over the Debtor’s real property owned jointly with his wife), Winch Legal Pty Ltd and Winn Consulting Pty Ltd who are plaintiffs in the Magistrates Court of Western Australia proceeding. At some point the Trustee must make an election pursuant to s 60 of the Bankruptcy Act as to whether to defend the Western Australian proceeding or not. All of these third-party creditors will be denied the ability to promptly prove their debts and be paid.
The Trustee prepared a Calculation of Estimated Annulment Payout as at 8 August 2024 to be $113 238.33. I reproduce this table below:
Calculation of Estimated Annulment Payout Amount (Incl. GST)
($)Petitioning Creditor Costs 7,020.31 Bankruptcy Trustee's Remuneration to 7 August 2024 22,533.50 Bankruptcy Trustee's Disbursements 522.16 Legal Fees 19,758.42 Unsecured Creditor - Deputy Commissioner of Taxation Unknown Unsecured Creditor - Westlink Legal Pty Ltd Unknown Unsecured Creditor - Winn Consulting Pty Ltd 61,000.00 Unsecured Creditor - Yanna Fang (Petitioning Creditor) 23,797.82 Estimated Interest Claims Unknown AFSA Realisation Charge (7%) 9,424.25 Subtotal 144,056.46 Less: Payment to petitioning creditor on 8 July 2024 and 22 July 2024 -30,818.13 Total Contribution Required 113,238.33
The Debtor’s Counsel submitted that Mr Lin would suffer a particular prejudice if I did not grant the extension of time (and stay) because he would be disqualified from managing the corporation of which he is sole director and consequently would be unable generate income for his family.[13] In the Debtor’s Statement of Affairs dated 15 July 2024 (Statement of Affairs), which is incomplete and vague, the Debtor answered question 31 ‘Do you live with anyone who relies on you for financial support?’ “NO”.[14] Counsel also accepted that there was no evidence before me regarding how financial support would be affected. The Solicitor for the Trustee submitted that the Debtor would not be prevented from working, due to the bankruptcy, he is simply not in the position to be a director and that in any event he could seek leave under section 206G of the Corporations Act 2001 (Cth) to allow him to manage the corporation.
[13] Transcript P12:L5-19.
[14] Affidavit of Jason Lloyd Porter sworn 8 August 2024 (Trustee Affidavit), Annexure “JLP-1”, 17.
The prejudice to third party creditors, should I grant the extension of time, outweighs any prejudice suffered by the Debtor if I do not.
An Arguable Case
At a hearing de novo before a judge it will be incumbent on the Creditor to prosecute her petition, but the Debtor must prove solvency or any other sufficient cause in opposing the making of the sequestration order by a judge.[15] The Debtor alleges that:
(a)he is Solvent; and
(b)he has “Other Sufficient Cause” – ex debito justitiae.
[15] Bechara v Bates [2021] FCAFC 34; 286 FCR 166, [27].
The Debtor contended that he is not insolvent because his Bank of China bank account was frozen and that he has paid the Petitioning Creditor in full. The submissions on solvency was put in the following manner at paragraph [18] of the written submissions of the Debtor:
Mr Lin contends that he is not insolvent.4 He deposes to real and personal property, the value of which he estimates at approximately $4.8 million.5 The Trustee has identified that the real property owned (partly) by Mr Lin was purchased in 2020 and 2022 for $3.89 million.6 Those assets eclipse the mortgages owing on those properties. This submission puts a gloss on the evidence before me. There is a paucity of evidence other than mere assertions for me to take into account as to the solvency of the Debtor.
I make the following observations of the material before me:
(a)The estimated value of the real property of the Debtor takes into account the property the Debtor owns with his wife in a joint tenancy. This property is the subject of possession and debt recovery proceeding in excess of two (2) million dollars by the ANZ Bank in the Supreme Court of New South Wales. This property is also the subject of caveated interests. There is no independent evidence as to the value of this property or what the net realisation would be if the property was sold, or how quickly this asset could be realised. The same can be said about the real property held by the Debtor and his sister as tenants in common in equal shares. This property is the subject of a mortgage to the Commonwealth Bank of Australia in the amount of $422,947.62 and is the subject of a caveat in favour of the Trustee. There is no independent evidence as to the value this property or what the net realisation would be if the property was sold or how quickly this asset could be realised.
(b)According to the recently filed taxation returns annexed to affidavit of the Trustee the Debtor’s annual income during the past seven years has been between $20,000 and $35,000, not the $40,000.00 per month as submitted by the Debtor.
(c)The Debtor declares in his Statement of Affairs that he has three (3) bank accounts: a Commonwealth bank account; an ANZ bank account; and an NAB bank account.[16] He does not know the balance of a Commonwealth Bank account. He says the NAB account has a balance of approximately $10,200 and his ANZ account has a balance of approximately $535.00.[17] An ANZ Access Advantage Statement is annexed to the Debtor’s affidavit.[18] As at 7 December 2023 the balance of that account was $570.01. There is no bank statement provided regarding the NAB account. The Debtor did not depose to holding the Commonwealth and ANZ bank accounts or to their balances in his affidavit material.
(d)The Debtor deposed at paragraph [22] of his affidavit that he holds a Bank of China account that has a balance of RMB 300,000 (approximately $63,281 Australian Dollars). There is no evidence in the form of a bank statement before me that verifies the Debtor’s Bank of China account does in fact have a balance of RMB 300 000 at the date of swearing his affidavit. The Bank of China account is not referred to in the Debtor’s Statement of Affairs.
(e)At page 53 of the annexures to the Debtor’s Affidavit there is a bank statement from the Bank of Communications, much of this statement is in Chinese characters.[19] The bank statement has not been translated. I am unable to ascertain from this bank statement in whose name the bank account is held. There are some parts of the document that I am able to read and understand, namely the numerals and the English words and abbreviations. It is apparent that this account is not frozen as the transaction history shows monies coming in and going out of this account between 28 June 2024 and 20 July 2024. The balance of this account as at 20 July 2024 was RMB 203,712.63. The Debtor has chosen not to translate this bank statement but to translate others. I am unable to the take this annexure into account when assessing solvency.
(f)The Debtor attested to holding a Jiao Tong Bank account with a balance of RMB 250, 000.[20] There is no bank statement exhibited to the Debtor’s Affidavit from the Jiao Tong Bank. The Jiao Tong Bank Account is not mentioned in the Debtor’s Statement of Affairs.
(g)The motor vehicles referred to in the assets table in paragraph [22] of the Debtor’s Affidavit are described as company cars. In the Debtor’s Statement of Affairs the Debtor declared that he does not own any vehicles in his name. The vehicles cannot be characterised as assets of the Debtor.
[16] Trustee Affidavit, Annexure “JLP-1”, 21.
[17] Trustee Affidavit, [22].
[18] Lin Affidavit, Annexure “SHL-01 Tab 6”, ‘Shao Hua Lin’s ANZ nak account statement’, 23-27.
[19] Lin Affidavit, Annexure “SHL-01 Tab 14”, ‘China bank statement’, 53.
[20] Lin Affidavit, [22].
The evidence of the Debtor regarding income, assets and liabilities is at its highest inconsistent and not substantiated and at its lowest self-serving, requires full investigation and verification.
I was referred to the decision of Judge Lucev in in Murphy v Nyoni[21] regarding practical tests for assessing solvency beyond the assertion the statutory definition in s 5 of the Bankruptcy Act, that is, a person is solvent if the person is able to pay all the person’s debts as and when they fall due. I adopt those practical tests.
[21] [2017] FCCA 143, [27] –[31]
It seems to me that the Debtor’s income is approximately $35,000 per annum based on his tax returns. The real properties will not be realisable in a reasonable time that is relatively quick because one property is subject to possession proceedings and because the other is held as a tenant in common. As to verifiable cash on hand the Debtor has available to him $570.01 in the ANZ Bank account. If I took into account the RMB 203,712.63 in the Communications Bank account (approximately $42,959 Australian Dollars) then on my calculations the Debtor may have approximately $43,529 Australian Dollars available to him to discharge his debts as and when they fall due.
The Trustees estimated annulment payout of $113,238.33 does not include amounts owed to the Deputy Commissioner of Taxation, the debt owed to Westlink Legal Pty Ltd and any interest claims. One can infer that the annulment payout will soon exceed $113,238.33.
Based on the material before me I am not convinced that the Debtor has an arguable case that he is solvent.
Other Sufficient Cause
The Debtor now seeks to challenge the judgment upon which the bankruptcy notice was issued on the basis that the Debtor alleges that he was not served with the proceeding upon which the default judgment was based. This ground of opposition was first raised in the written submissions of the Debtor dated 12 August 2024 and elaborated on in oral submissions before me.
As a preliminary step for the Debtor to argue this ground, leave of the Court would be required to amend his grounds of opposition. It is unlikely that leave would be granted to make such amendment because:
(a)The Debtor has been legally represented since 7 February 2024.
(b)The Debtor did not raise this ground until the extension of time hearing/stay hearing on 12 August 2024. It was not raised or flagged by Counsel at the hearing on 30 July 2024 thus disadvantaging the Creditor and Trustee with respect to putting on evidence and preparing arguments.
(c)No attempts have been made by the Debtor to set aside the Local Court Default Judgment.
(d)The Debtor discharged the whole of the judgment debt.
(e)The Debtor appears to accept that he owed the monies the subject of the judgment to the Creditor and acted accordingly by making instalment payments with respect to the monies due and making further payments after the Sequestration Order was made.
(f)AON case management principles would militate against it.[22]
[22] Aon Risk Services Australia Ltdv ANU [2009] HCA 27.
In any event there is a paucity of evidence with respect to this “new” opposition. There are assertions made by the Debtor in his affidavit at paragraphs [8], [10] and [11] without detail or corroboration. Because of the inconsistencies generally in the evidence given by the Debtor and the fact the evidences raises more questions on this issue than it resolves, I am reluctant to take this material on face value where corroborative evidence would be easily available. The Debtor does not exhibit the Local Court file. As a party a copy of the file would be easily accessible from the Local Court. Because the Debtor raised this argument on the day of hearing there was no opportunity for the Creditor to tender contradictory evidence.
As it is unlikely that leave to amend to grounds of opposition would be granted, as such the argument raised with respect to Other Sufficient Cause ground is futile.
STAY
To successfully argue that a stay is warranted the Debtor must show an arguable case and that the balance of convenience is served by the granting of the stay.
Arguable case
I have dealt with the issue of arguable case in paragraphs [44] to [50] of these Reasons for Judgment and have concluded that the Debtor does not have an arguable case that he is solvent and that the argument raised as Other Sufficient Cause is futile.
Balance of convenience
In this regard I refer to those matters dealt with under the heading ‘Prejudice’ and find that the balance of convenience is not served by granting a stay.
CONCLUSION
For the reasons I have set out above I dismiss the Interim Application and as far is as necessary the Application for Review.
I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Bingham. Associate:
Dated: 19 August 2024
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