Fidelity Capital (Australia) Pty Ltd v Delic

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FEDERAL COURT OF AUSTRALIA

Fidelity Capital (Australia) Pty Ltd v Delic [2022] FCA 41  

Appeal from: Delic v Kazar and Slaven as Joint Trustees in the Bankrupt Estate of Delic (No 2) [2021] FCCA 130
File number(s): NSD 131 of 2021
Judgment of: GRIFFITHS J
Date of judgment: 1 February 2022
Catchwords: BANKRUPTCY AND INSOLVENCY – appeal from decision to reverse admission of proof of debt by trustee in bankruptcy pursuant to s 104(2) of the Bankruptcy Act 1966 (Cth) – proposed consent orders allowing appeal withdrawn – consideration of appropriate role of Court with respect to consent orders when exercising appellate jurisdiction under Bankruptcy Act – debt arising from buy and lease back loan agreement over two vehicles terminated due to insolvency of company – whether guarantee by respondent amounted to a provable debt – held: appeal allowed in part
Legislation:

Bankruptcy Act 1966 (Cth) ss 82, 102, 104, 107

Federal Court of Australia Act 1976 (Cth) ss 24(1)(d), 25(2B)(b)
Cases cited:

Australian Competition and Consumer Commission v Real Estate Institute (WA) [1999] FCA 1387; 95 FCR 114

Australian Competition and Consumer Commission v Woolworths (SA) Pty Ltd [2003] FCA 530; 193 ALR 417

Bradken Ltd v Norcast S.ar.L [2013] FCAFC 123; 219 FCR 101

Café Du Liban Pty Ltd v Bespoke Garage Pty Ltd [2017] NSWSC 779

Daevys v Official Trustee in Bankruptcy [2011] FCA 398

Delic v Kazar and Slaven as Joint Trustees in the Bankrupt Estate of Delic (No 2) [2021] FCCA 130

Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52

James v Woodgate [2012] FMCA 1214; 273 FLR 22

Lamson Store Service Co Ltd v Russell Wilkins & Sons Ltd [1906] HCA 87; 4 CLR 672

Midland Montagu Australia Ltd v Harkness (1994) 35 NSWLR 150

O’Dea v Allstates Leasing System (WA) Pty Ltd [1983] HCA 3; 152 CLR 359

Re Payne; Ex Parte Levi [1986] FCA 320

Re Scott (Trustee), in the matter of Heinrich (Bankrupt) [2006] FCA 718

Redbubble Ltd v Hells Angels Motorcycle Corporation (Australia) Pty Ltd [2021] FCA 1467; 163 IPR 491

Robertson v Knott Investments Pty Ltd (No 3) [2010] FCA 1074

Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy [2008] FCAFC 7; 166 FCR 64

Thompson Australia Holdings Pty Ltd v Trade Practices Commission [1981] HCA 48; 148 CLR 150
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 94
Date of hearing: 31 January 2022
Counsel for the Appellant: Mr D Weinberger
Solicitor for the Appellant:  ERA Legal
Counsel for the First Respondent: The first respondent appeared in person
Solicitor for the Second Respondent: Emerson Lewis Lawyers (the second respondent filed a submitting notice save as to costs)

ORDERS

NSD 131 of 2021
BETWEEN:

FIDELITY CAPITAL (AUSTRALIA) PTY LTD (ACN 604 621 589)

Appellant
AND:

DAMIR JAKOV DELIC

First Respondent

MICHAEL SLAVEN AS TRUSTEE IN…

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Details
Case
[2022] FCA 41
Decision Date

CaseChat Overview and Summary

Fidelity Capital (Australia) Pty Ltd brought an appeal against Delic, the trustee in bankruptcy of a company, regarding the admission of a proof of debt (POD) under section 104(2) of the Bankruptcy Act 1966 (Cth). The appeal centred on a buy and lease back loan agreement over two vehicles that was terminated due to the company's insolvency. The central issue was whether the guarantee by Delic amounted to a provable debt. The court was required to determine the appropriate role of the Court when exercising appellate jurisdiction under the Bankruptcy Act in relation to consent orders. The court also needed to assess the legitimacy of the guarantee as a provable debt and whether the trustee's decision to reverse the admission of the POD was justified.

The court concluded that the appeal should be allowed in part. Grounds 1A and 8 were upheld, and ground 13 was upheld in part for an amount of $2,682.33. The court found that the Termination Sum should not be considered as a discounting factor. The Trustee should have admitted the POD for an amount of $97,847.33, which is less than the amount sought by the appellant. The primary judge's orders regarding the costs of the proceeding below should not be disturbed. The court tentatively suggested that there should be no order as to costs, considering the procedural history of the matter, the rejection of the majority of the grounds of appeal, and the appellant's limited success.

The court ordered that the parties should seek to agree on final orders, including the costs, and if they could not agree by 14 February 2022, they should file and serve their respective proposed orders, along with an outline of written submissions not exceeding two pages in length. Final orders would then be determined on the papers without a further oral hearing.

Orders

Orders of the court

1. The parties should seek to agree orders giving effect to these reasons for judgment, including as to costs.

2. If the parties are unable to agree final orders by 14 February 2022, each should by no later than that day file and serve a copy of their respective proposed orders, together with an outline of written submissions in support not exceeding two pages in length.

3. Final orders will then be determined on the papers and without a further oral hearing.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The Court wishes to express its profound gratitude to Mr Bender for his valuable assistance to the Court on short notice and on a pro bono basis. His willingness to assist the Court without financial reward is in the best and noble traditions of the Bar. (d) Procedural background following the amicus submissions Following the amicus submissions, the appellant informed the Court by email on 23 December 2021 that it did not propose to file any submissions in reply to the amicus’ submissions. As noted above, the appellant instead withdrew the Proposed Consent Orders. The earlier procedural history of the proceeding may be summarised as follows:·26 February 2021: The notice of appeal was filed by Fidelity. ·17 May 2021: Justice Perry made an order listing the matter for a case management hearing on 9 June 2021. ·7 June 2021: Justice Perry made orders vacating the case management hearing on 9 June 2021 and re-listing the matter for a case management hearing on 30 June 2021.·30 June 2021: Justice Perry made orders requiring the appellant to file and serve an amended notice of appeal by 14 July 2021 (which was not complied with), submit drafts of the indexes to Part A and B of the Appeal Book by 11 August 2021, and listing the matter for a case management hearing on 21 July 2021. The orders noted that:(a)The solicitors for Mr Delic indicated prior to the first case management hearing on 30 June 2021 that they would be filing a notice of ceasing to act.(b)At the case management hearing Mr Delic sought an adjournment of two to three weeks to instruct solicitors, and as such the Court considered it appropriate to afford Mr Delic that opportunity. ·21 July 2021: Justice Perry made orders vacating the case management hearing. Justice Perry was of the view that no further timetabling order should be made until it was docketed to a Judge for hearing. ·18 August 2021: Orders made listing the matter for a case management hearing on 31 August 2021. ·31 August 2021: Orders made at the case management hearing setting a timetable for the matter to be heard on 10:15am on 18 November 2021. ·4 and 8 November 2021: Emails were sent by NSW Registry requesting an urgent explanation for Mr Delic's failure to file written submissions and list of documents to be included in Part C in accordance with orders dated 31 August 2021. No response was received from Mr Delic. ·9 November 2021: An email was sent to the parties by NSW Registry listing the matter for an urgent case management hearing on 10 November 2021.·10 November 2021: At the case management hearing on 10 November 2021, Mr Delic claimed that the matter had been settled, that he was battling with health issues, and sought an adjournment of the hearing for six weeks to finalise the settlement. The appellant stated that no such settlement had been reached. Mr Delic was told that if he sought an adjournment, he would have to make a formal application with a supporting affidavit promptly. Otherwise, if the matter did not settle before the hearing, he should comply with the Court’s orders dated 31 August 2021 and file written submissions promptly because the hearing of the appeal would proceed as listed. ·18 November 2021: On the morning of the hearing, Mr Delic sent a letter to Chambers (without notice to the parties) outlining his ongoing medical and mental health issues and he was seeking to make financial arrangements to engage legal representation. He also stated that he was continuing to seek to settle the matter with the appellant. He provided no supporting evidence regarding these issues. Mr Delic requested an adjournment of approximately two to three months, which was not granted. It might also be noted that at 10:26 am on Monday, 31 January 2022 (shortly after the hearing had commenced) Mr Delic sent an email to my associate requesting an adjournment of the hearing so that he could “consider the advice of the amicus curiae and to potentially settle this matter with the appellant” and he claimed that he had found a barrister and law firm to assist him with submissions. He added that he had contracted COVID-19 and had been “very ill” for the past month. The adjournment request was opposed by the appellant. I refused the adjournment having regard to the lengthy history of the matter and Mr Delic’s failure to provide any evidence in support of his claims. His adjournment request effectively duplicated his unsuccessful request dated 18 November 2021. The factual background summarisedThe facts giving rise to the POD

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Furthermore, in answer to ground 12, I am not satisfied that the Termination Sum would be a relevant discounting factor in this respect. The express terms of cl 11.2(g)(i) do not suggest the parties intended that the Termination Sum could be an amount payable by Fidelity to Composite (see [81] above).Conclusions For these reasons, grounds 1A and 8 should be upheld and ground 13 should be upheld in part for an amount of $2,682.33. The appeal should therefore be allowed in respect of these grounds but otherwise dismissed. The orders dated 5 February 2021 of the primary judge should be set aside. Including the $165.00 found by the primary judge to be payable by Mr Delic for recovery costs (at [129]), the Trustee should have admitted the POD for an amount of $97,847.33. Orders varying the Trustee’s decision to admit the POD in whole should be made. The appellant did not claim any amount as interest. The parties should seek to agree orders giving effect to these reasons, including as to costs. Having regard to the procedural history of the matter, the rejection of the majority of the grounds of appeal and the appellant’s limited success which is reflected in the fact that I have found that the Trustee should have admitted the POD for an amount of $97,847.33 which is considerably less than that sought by the appellant, together with the first respondent’s status as a litigant in person, the Court’s tentative view is that there should be no order as to costs. The Court’s additional tentative view is that the primary judge’s orders dated 9 April 2021 as amended on 22 April 2021 as to the costs of the proceeding below should not be disturbed. If the parties are unable to agree final orders, by no later than 14 February 2022, each should file and serve a copy of their proposed orders, together with an outline of written submissions not exceeding two pages in length. Final orders will then be determined on the papers and without a further oral hearing.

Ratio Decidendi

Legal Principle Established

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