Faskheev v Peterson (No.2)
[2007] FMCA 288
•9 March 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FASKHEEV & ANOR v PETERSON (No.2) | [2007] FMCA 288 |
| BANKRUPTCY – Application for Review of Sequestration Order – Application for Review dismissed. |
| Bankruptcy Act 1966, s.52 |
| Faskheev & Anor v Peterson (No.1) [2007] FMCA 232 Sandell v Porter (1966) 115 CLR 666 Re Kostezky: Ex parte Milder Elfman Szmerling Krycer Pty Ltd (1996) 67 FCR 101 |
| Applicant Creditors: | MIKHAIL FASKHEEV and LIDIA FASKHEEVA |
| Respondent Debtor: | JENETHEA ADELINE PETERSON |
| File number: | ADG 259 of 2006 |
| Judgment of: | McInnis FM |
| Hearing date: | 27 February 2007 |
| Delivered at: | Adelaide |
| Delivered on: | 9 March 2007 |
REPRESENTATION
| Solicitor for the Applicant Creditors: | Mr. K. Jolly |
| Solicitors for the Applicant Creditors: | Kevin Jolly |
| Respondent Debtor: | In person |
| Solicitor for the Trustee: | Mr. M. Critchley |
| Solicitors for the Trustee: | Kelly & Co. |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG 259 of 2006
| MIKHAIL FASKHEEV and LIDIA FASKHEEVA |
Applicant Creditors
And
| JENETHEA ADELINE PETERSON |
Respondent Debtor
REASONS FOR JUDGMENT
(As corrected)
This is an application for review of a Sequestration Order made by a Registrar on 11 December 2006. The Sequestration Order was made in the usual form against the estate of Jenetha Adeline Peterson (the Debtor). In the application for review the Debtor seeks to revoke the Sequestration Order.
Mikhail Faskheev and Lidia Faskheeva (the Creditors) oppose the order. Counsel appearing for the Trustee has appropriately adopted a neutral position, although drawing to the attention of the Court that certain work has already been undertaken by the Trustee following the Sequestration Order made by the Registrar on 11 December 2006.
The Debtor who is self represented made two preliminary applications. The first was an application for extension of time, which was granted. The second was an application for an adjournment which was refused (see Faskheev & Anor v Peterson (No.1) [2007] FMCA 232).
The application for review of the Sequestration Order is a hearing de novo. The Court noted at the outset and it was not disputed that reverification and reservice of the petition had been dispensed with by order of the Registrar on 11 December 2006. The Court did not require reverification in this instance as the circumstances have not changed.
Accordingly it remains for the Court to consider whether the Sequestration Order should be set aside.
The Debtor has relied upon affidavits sworn by her on 26 October 2006, 16 November 2006 and 31 January 2007. In addition the Debtor relies upon a document entitled, "Opposition to the Petitioners ‘Sworn Affidavit’" filed 24 November 2006 and a document entitled, "Further and Better Particulars in Opposition to the Petitioners" (sic) filed 6 December 2006.
It should be noted that as indicated in the Court's earlier judgment concerning the application for extension of time and adjournment, that the Debtor has had a number of opportunities to file and serve additional affidavit material. Orders were made by a Registrar of the Court on 6 November 2006, 20 November 2006 and 27 November 2006 for the Debtor to file and serve any further material upon which the Debtor sought to rely in relation to the question of solvency.
It would appear that the document entitled, "Further and Better Particulars in Opposition to the Petitioners" (sic) filed 6 December 2006 was filed in response to the orders made on 27 November 2006. This Court also made an order permitting the Debtor to file and serve further affidavit material, at an audio-link hearing conducted on
22 February 2007. No further documents have been filed and served by the Debtor arising out of the orders made at the audio-link hearing.
In the bankruptcy notice dated 27 July 2006 the Creditors claim to be owed a debt of $31,947.16. It is not in dispute that the debt remains outstanding. The debt arises from proceedings which appear to have been commenced in the Magistrates Court of South Australia on 11 November 2003. A judgment in default was obtained on
8 December 2003. Attempts were made to execute the judgment by warrant for sale. On 12 May 2005 an application was made by the Debtor to set aside the judgment. That application was scheduled to be heard on 10 June 2005. According to the certified copy of record from the Magistrates Court of South Australia the Debtor's application to set aside the default judgment was adjourned from 10 June 2005 to 1 July 2005.
According to the Court record on 1 July 2005 the application to set aside the default judgment was adjourned to 22 July 2005. On 22 July 2005 the parties appear to have been represented and the application to set aside the default judgment was struck out. The total of the debt owing of $31,947.16 comprises an amount of $28,319.90 being the judgment, plus interest accrued since the date of the judgment of $3,627.26. It is not disputed that the bankruptcy notice was served on 27 July 2006. The creditor's petition was served on 16 October 2006.
In the Debtor's affidavit sworn 26 October 2006, the Debtor appears to take issue with the judgment obtained by the Creditors and seeks to have that judgment set aside. Reference is made to the Debtor's representatives and the alleged non-attendance at a hearing. Other reference is made to property of the Debtor which I shall refer to in further detail along with other matters raised by the Debtor.
In brief terms, as I understand it, the Debtor claimed to be solvent on the basis of her current property holdings and/or otherwise seeks to defer further consideration of this matter pending the outcome of other proceedings, to which reference has already been made in the Court's judgment referred to earlier ([2007] FMCA 232).
In her affidavit sworn 16 November 2006 the Debtor refers to current proceedings in the Supreme Court of South Australia (No.1329 of 2005). The Court received as an exhibit a copy of the Statement of Claim in those proceedings (exhibit Debtor 1). The Statement of Claim in the Supreme Court proceedings reveals that Permanent Mortgages Pty Ltd is the plaintiff and the Debtor is the defendant. The claim relates to an alleged loan of $397,600.00 advanced by the plaintiff to the Debtor allegedly on or about 28 November 2003 repayable on or about 27 November 2004. Security for the loan is claimed to have been provided over a property at 56A Coburg Road Alberton (the Coburg Road property).
The plaintiff claimed to have entered into possession of the Coburg Road property and to have received certain proceeds after sale costs of $217,962.59. The order sought by the plaintiff in the Supreme Court proceedings appears to be for an alleged amount owing pursuant to a loan offer and mortgage of $239, 248.57. Other orders are sought for interest and costs.
Reference is made to those Supreme Court proceedings by the Debtor in her affidavit sworn 16 November 2006. That affidavit essentially seeks adjournment of the current proceedings to enable the Supreme Court proceedings to be decided with the object of then making available to the Debtor funds as a result of those proceedings which may then be used to pay the Creditors in the proceedings before this Court. It is not suggested that those Supreme Court proceedings are proceedings taken for or on behalf of the Creditors or that the Creditors are otherwise involved in the Supreme Court proceedings.
Attached to the Debtor's "Further and Better Particulars in Opposition to the Petitioners" (sic) there is a document purporting to be an "Amended Defence, Set Off and Counterclaim" in the Supreme Court proceedings. That Defence does not dispute the loan or that the loan was advanced but rather challenges the right of the plaintiff to enter into possession of the Coburg Road property and raises other issues. It is not necessary for the Court to explore in detail the other issues raised in the Supreme Court proceedings, but is sufficient to note that in my view those proceedings, whilst perhaps having the potential to realise funds from which the current debt could be paid by the Debtor to the Creditors, are otherwise irrelevant to this application.
I shall consider further the relevance of the potential capacity to obtain funds to pay the debt. It is sufficient to note that the Applicant in her, "Opposition to the Petitioners ‘Sworn Affidavit’" filed 24 November 2006 raises other issues concerning other properties and a claim of there being no accounting given, specifically in relation to the Coburg Road property. The other properties include 31 East Terrace Ceduna, which appears to be a property owned by the Debtor, sold on
9 December 2005 for $48,000.00 where the Debtor received nil proceeds of sale though with a claim by the Debtor that no accounting was made by the mortgagee of that property, namely, Permanent Mortgages Pty Ltd.In the Debtor's "Opposition to the Petitioners ‘Sworn Affidavit’" the Debtor refers to a property at 76 Poynton Street Ceduna (the family home) where she states an amount of $167,000.00 is owing. The Debtor refers to another property at 12 Main Coast Road Pine Point where she claims an amount of $180,000.00 is owing. Another property at 26 Victoria Parade Port Augusta is referred to and an amount of $40,000.00 claimed to be owing. Apart from referring to there being no accounting made Permanent Mortgages Pty Ltd on the sale of the Coburg Road property referred to earlier, the Debtor appears to refer to there being no accounting made by the same mortgagee upon sale of two allotments at 31 East Terrace Ceduna.
The Debtor seeks to give values, without any independent valuation, of the various properties and in our "Opposition to the Petitioners ‘Sworn Affidavit’" claims assets of $509,750.00 less liabilities arising from amounts owing on the properties of $387,000.00 leaving what the Debtor claims to be total assets of $122,000.00. In the same document the Debtor then asks, "Please allow me to put together a 'Scheme of Arrangement' and trade on."
The Debtor also refers to other proceedings pending in the District Court of South Australia (No.06-198) (the District Court proceedings). In those proceedings the Debtor is the plaintiff. The Defendants are as follows:
a)First Defendant, Darcy John O'Shea,
b)Second Defendant, Patricia Anne Jenner,
c)Third Defendant, Dianne Marie Warmington,
d)Fourth Defendant, Paul Anthony Warmington,
e)Fifth Defendant, Permanent Mortgages Pty Ltd,
f)Sixth Defendant, Property Realisations Pty Ltd,
g)Seventh Defendant, Hayley Gloria Beattie,
h)Eighth Defendant, Warren John Beattie.
An Amended Statement of Claim dated 30 November 2006 in the District Court proceedings appears to raise issues concerning "warehouses of antiques" and issues concerning security over the 31 East Terrace Ceduna, 79 Poynton Road Ceduna and the Coburg Road properties. My perusal of the documents provided by the Debtor in her "Further and Better Particulars in Opposition to the Petitioners" (sic) reveals again that the Creditors are not parties to the District Court proceedings. It is difficult to discern the cause of action in those proceedings but doing the best I can it would seem that again an issue arises concerning the Debtors assets which may assist in the Debtor seeking to establish solvency or a capacity at some future date pending a successful outcome of the District Court proceedings, to pay the debt now due which is the subject of the bankruptcy notice and creditor's petition in the proceedings before this Court.
In my view the mere existence of properties and/or the possibility of success in pending proceedings whether in the Supreme Court or the District Court proceedings does not of itself provide any sufficient basis upon which the Court may conclude that the Debtor is solvent. The Debtor has had ample opportunity over a significant period of time to either realise assets in order to pay the debt owing to the Creditors, or to provide further affidavit evidence establishing that she has assets that can be realised in a relatively short time to enable her to pay the debt. This is an issue which clearly raises a question of fact appropriate for this Court to determine on the available evidence (see Sandell v Porter (1966) 115 CLR 666) (Sandell v Porter).
The Debtor's evidence is hopelessly inadequate concerning her asset position and the value of the various properties to which reference has been made. Further I am not satisfied on the evidence before me the Debtor has the capacity to realise assets to pay the debts or that it is appropriate for the Court to speculate on the outcome of a pending Supreme Court or District Court proceedings. It is the Debtor who must satisfy the Court that she has the ability to pay her debts (see Re Kostezky: Ex parte Milder Elfman Szmerling Krycer Pty Ltd (1996) 67 FCR 101).
I am not satisfied that the Debtor has provided sufficient evidence of an ability to pay the debt to the Creditors which clearly is a debt properly described as "long overdue".
Whilst I accept that the application of the relevant principles of law set out in Sandell v Porter do not necessarily involve a simple balance sheet assessment of assets against liabilities, a Debtor is required in my view to produce evidence of a capacity to realise by sale or mortgage assets "within a relatively short time" (see Sandell v Porter at [15]).
I am not satisfied the Debtor has demonstrated that she is able to pay her debts as they fall due.
I am otherwise satisfied that the requirements of s.52 of the Bankruptcy Act 1966 have been established, and further I am not satisfied that there is any other sufficient cause why the Sequestration Order ought not to have been made in this application.
Accordingly it follows for the reasons given that the application for review filed 31 January 2007 should be dismissed and the Debtor should pay the Creditor's and Trustee's costs. I shall hear the parties in relation to the precise form of the orders.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 2 April 2007
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