Fitzgerald v Fitzgerald
[2020] FCCA 3632
•17 December 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
Fitzgerald v Fitzgerald [2020] FCCA 3632
File number(s): BRG 235 of 2020 Judgment of: JUDGE VASTA Date of judgment: 17 December 2020 Catchwords: BANKRUPTCY – sequestration order – all prerequisites present – question as to whether appeals still to be heard should mean that order is not made – sequestration order made Legislation: Uniform Civil Procedure Rules 1999 (Qld)
Bankruptcy Act 1966 (Cth)
Cases cited: Watts v Bendigo and Adelaide Bank Ltd (No 4) [2011] FCA 310 Number of paragraphs: 32 Date of hearing: 17 December 2020 Place: Brisbane ORDERS
BRG 235 of 2020 BETWEEN: ROSLYN MARY FITZGERALD
First Applicant
ROSLYN FITZGERALD PTY LTD (ACN 159 299 171)
Second Applicant
ROSLYN FITZGERALD NO 3 PTY LIMITED (ACN 607 478 606)
Third Applicant
AND: MARK ANDREW FITZGERALD
Respondent
ORDER MADE BY:
JUDGE VASTA
DATE OF ORDER:
17 DECEMBER 2020
THE COURT ORDERS THAT:
1.A sequestration order be made against the estate of MARK ANDREW FITZGERALD.
2.The Respondent pay costs to the Applicant of this Application fixed in the sum of $7,171.75.
The Court notes that the date of the act of bankruptcy is 16 April 2020
REASONS FOR JUDGMENT
(EX TEMPORE)JUDGE VASTA
This is a hearing on a creditors’ petition. Such a hearing would usually be dealt with by the Registrar of the Federal Circuit Court, but, given the circumstances of this particular matter, the Registrar referred the matter to me.
Whilst I do not want to say too much about the factual matters, it does seem to me that I do need to go through some of these matters. There was a Supreme Court proceeding commenced on 22 January in which the Respondent, Mark Fitzgerald, was claiming monies from an oral agreement that he entered into with his sister, the Applicant, Roslyn Fitzgerald. In short, the oral agreement, allegedly made in 2014, was that the Respondent would source real estate that could be developed and that the Applicant would be using her financial prowess to fund the development, which would be overseen by the Respondent. The Respondent claims that this oral agreement was one in which the two of them would share the profits fifty-fifty.
It would seem that the Applicant denied that there was such an arrangement and, instead, said that the true conversation was that she said to the Applicant that they could enter into a partnership and that everything would be fifty-fifty; that is, that he, the Respondent, work on site and manage the development and she would supply the finance. She says that the Respondent said, “Okay, but I don’t do contracts.” The Applicant says that she said words to the effect, to the Respondent, “I’ve been through a messy divorce and I know some of your history. I’m not doing this without contracts. I need it all above board,” to which she says the Respondent answered, “I don’t do contracts. I just want to be paid for what I do.” The Applicant said, “Okay, then. I’ll pay you for what you do – your time.” The Respondent said, “Yes.”
From that time, the Applicant says that the Respondent gave her four invoices in 2014, for which she paid various sums of money, and I should say that those sums of money were just over $5,000, just short of $14,000, $7,500 and $1,500. There was another invoice on 22 June 2017 for $110,000. All of those invoices had been paid.
The matter was set down for trial in the Supreme Court before Flanagan J. It was to commence on 3 June 2019. A week before the trial, the matter was mentioned by Flanagan J. Flanagan J noted that the Respondent, who is the plaintiff in the matter before Flanagan J, had not complied with orders made by other judges to do certain things so that the trial could actually commence when it was supposed to. The trial ended up having to be adjourned. Flanagan J made this order:
The plaintiff is to pay forthwith, and in each case on the indemnity basis, the defendants’ costs of this application and thrown away as a consequence of the adjournment, such costs to include the costs of the case conference on 13 May 2019 before the Resolution Registrar, and correspondence and other costs incurred as a result of the plaintiff’s non-compliance with the orders of the Court made on 2 April 2019 and on 13 May 2019.
The Applicant’s lawyers served a cost statement on the lawyers for the Respondent on 3 July 2019 claiming costs in the amount of $137,655.39. The lawyers for the Respondent filed a notice of objection under r 706 of the Uniform Civil Procedure Rules 1999 (QLD) (“UCPR”).
An independent cost assessor, Mr Stephen Hartwell, was then appointed to undertake a cost assessment in accordance with those UCPR provisions. He provided his draft costs assessment certificate on 19 November 2019. He then sought, received and considered submissions on the costs of that assessment, and then, on 13 February 2020, issued a cost certificate, under rule 737 of the UCPR, for the amount of $137,758.52.
Based on that certificate, on 28 February 2020, a registrar of the Supreme Court entered an order under r 740 of the UCPR in the following terms:
That the Plaintiff [the respondent] pay the Defendant’ [the applicants’] costs pursuant to:
· the order of the court dated 27 May 2019; and
· the certificate of the costs assessor filed on 14 February 2020, assessed at $137,758.52.
That order was not complied with. The Respondent did not pay that sum.
On 24 March 2020, the Applicant caused a bankruptcy notice to be served on the Respondent. The Respondent did not reply to the bankruptcy notice; however, the Respondent did file an application to set aside the bankruptcy notice. The registrar dismissed that application on 23 April 2020. On 24 April 2020, the Applicant filed the creditors’ petition in this Court and served that creditors’ petition on the Respondent. The Respondent appealed the decision of the registrar to the Federal Court. That matter was heard by Reeves J on 2 June 2020. On 6 November 2020, His Honour dismissed that application.
As far as the creditors’ petition was concerned, on 3 June 2020, Registrar Lynch adjourned the hearing of the creditors’ petition to await the outcome of the appeal before Reeves J. The matter came back on 8 December 2020, just over a month after Reeves J had given his decision, but the registrar, for other reasons that will become evident, sent the matter to me.
The Applicant has complied in all respects with what has to be done in the issuing of a creditors’ petition. The act of bankruptcy occurred on 16 April 2020, when there was no response to the bankruptcy notice. The creditors’ petition was presented on 27 April 2020. It was presented within six months of the date of the act of bankruptcy. It was in the correct form and had the correct spelling of parties. It was for a sum of more than $5,000. It was signed by a solicitor. It clearly had all of the times, dates and places of hearing endorsed on the petition cover sheet. There has been filed affidavits of debt and affidavits that show that the debt is still outstanding.
All that is needed to occur for a Court to make a sequestration order has been done: there is a debt; the debt is proved; the debt is outstanding; the Respondent has made no efforts to pay the debt; the Respondent has not shown that the Respondent is solvent – that is, that the Respondent can pay their debts when they are due. Therefore, prima facie, the Court should issue the sequestration order.
Before me today, Mr Edwards, who appears for the Respondent, has sought an adjournment of the proceedings on the basis that there are still ongoing appeals. He has also sought, as an alternative but also in addition, that this Court transfer the proceedings to the Federal Court of Australia.
His main submission as to the reason why the sequestration order should not be made is that the claim before Flanagan J is a claim for many millions of dollars. In effect, the Respondent is claiming that the evidence before the Supreme Court will, to use the Respondent’s words, overwhelmingly show that there had been such an arrangement made orally, as he claims there was. He further submitted that, when one looks at all of the profits that have been made because of this particular arrangement, the Applicant will have to pay the Respondent millions of dollars, which is far more than the $137,758.52 that the judgment debt is at. However, that argument has already been made before Reeves J.
Reeves J looked at the matter that was before the Supreme Court (Fitzgerald v Fitzgerald [2020] FCA 1615). His Honour said this at paragraph 37 of his judgment:
37. This analysis of the claims made by Mr Fitzgerald in his extant statement of claim Annexure “WPC4-1” and the evidence concerning those claims in his three affidavits filed in this application does not satisfy me that there is sufficient substance to those claims to justify my staying the operation of the bankruptcy notice until he has an opportunity to pursue them. In reaching this conclusion, I have had regard to a number of matters, including the following. First, the agreement is oral and it is alleged to have been made in a single conversation that occurred approximately three years before the Supreme Court proceeding was commenced. Secondly, the agreement is not pleaded in customary “he said”, “she said”, form, but is instead expressed in conclusory terms (see at [27] above). Thirdly, and perhaps most importantly, there is no contemporaneous record of the agreement despite it allegedly concerning developments involving the investment of many millions of dollars. Fourthly, to the extent that subsequent conduct might be relied on, Mr Fitzgerald has acknowledged that, in June 2017, he rendered a tax invoice to Ms Fitzgerald for consultancy fees which invoice was paid (see [36] above). This acknowledgement is arguably more consistent with the consultancy agreement pleaded in Ms Fitzgerald’s defence (see at [32] above) than the joint venture agreement pleaded in Mr Fitzgerald’s statement of claim. Finally, in his affidavits, Mr Fitzgerald himself seems to cast doubt on his claims and proffers, instead, other potential claims (see at [33(d)] above).
Having read carefully what the Respondent has said in his submissions to me, but, more importantly, having read very carefully what Reeves J has said, I am not persuaded that the argument relied upon by the Respondent is a sufficient reason not to grant the sequestration order.
As to the argument that there are appeals pending, I was told that the costs order itself is being appealed; however, upon talking to the counsel for the Respondent, I was informed that there are two appeals that are pending. The first one is to the costs order itself, but, upon questioning and discussion between Bench and Bar today, the appeal is not an appeal against the orders of Flanagan J. The order of Flanagan J is as I have already read; that is, that the Respondent pay indemnity costs of the Applicant thrown away by the adjournment of the trial.
The appeal, as it were, is against the order of the Supreme Court registrar of 27 February 2020. There was not a stay applied at the particular time and the Respondent is relying, it would seem, on new evidence that is said to have both been available, but not been available, at the time that Flanagan J made his order.
It is trite to say that the Rules talk about there being no allowance for new evidence on such an application as envisaged by the Respondent unless leave is granted. In any event, what it is that the Respondent is trying to do is not appealing the actual judgment of Flanagan J upon which this claim is based – that is, the $137,758.52.
I note also that, because the claim was for indemnity costs, if this really were what the Respondent was arguing about, that is, the quantum of the order, one would have thought that there would have been, at the very least, a payment of the amount that the Respondent believes is owed under the order and there the appeal would be as to the difference between what the assessor has calculated and what the Respondent says should be the amount. I do not consider that this “appellate” process is sufficient to warrant adjourning these proceedings.
The second appeal is an appeal of Reeves J’s decision of 6 November 2020. His Honour’s reasons are very detailed and extremely cogent and persuasive, but, even if they were not, the fact is that an appeal does not mean that there must necessarily be a stay of, or an adjournment of, a creditors’ petition. If this were so, then a person seeking to avoid bankruptcy would simply keep appealing and appealing, even to the High Court, to try and stave off the dark day.
But, more than that, the grounds of appeal do not, on the face of it, really seem to be arguable. The appeal is really a disagreement with the conclusion that His Honour makes in paragraph 37, that I have already referred to, of His Honour’s judgment. There is, it would seem, almost a plea that His Honour had ignored opinion evidence of the Respondent’s own solicitor as well as another person called Daniel Erez, who is a supposed development finance expert.
None of those aspects seem to me to have any substance that would cast doubt upon the correctness of what his Honour has said at paragraph 37 of the judgment.
The second ground seems to be the fact of the appeal against the cost assessor’s assessment and that, somehow, that should have been something that His Honour did not deal with properly. The remarks I have already made about that aspect are apposite with regard to that aspect of the appeal.
The other grounds talk of matters that are in proposed statements of claim that have actually yet to be filed. I am unclear how those matters, if they are not filed, could be of any particular assistance in the task that Reeves J had to undertake in coming to his conclusions.
The Applicant has correctly submitted to the Court, as is Counsel’s duty, that there does not seem to be any authority which has considered the question of the appropriateness of making a sequestration order in circumstances where an appeal has been filed in respect of the refusal to set aside a bankruptcy notice, but Counsel did refer me to there being authority for the proposition that the operation of a sequestration order or the proceedings thereunder should not be stayed simply because an application for special leave to appeal the dismissal of an appeal against the making of a sequestration order had been filed; the authority for that being Watts v Bendigo and Adelaide Bank Ltd (No 4) [2011] FCA 310.
This litigation has gone on for quite some time. The manner in which the Respondent has conducted the litigation was the subject of some criticism by Flanagan J. As well as this, there is the well-known application of a principle by Courts dealing in bankruptcy that persons who are insolvent should not be allowed to maintain their insolvency because such will be detrimental to the community.
When I weigh up all of those matters, I come to these conclusions: firstly, that an act of bankruptcy has occurred; secondly, that all the prerequisite conditions for making a sequestration order have been fulfilled; thirdly, that the grounds for opposition to the making of such an order are not sufficient for me to consider not making the order; fourthly, that the other litigation that is occurring is also not sufficient for me to delay the proper exercise of the Court’s function in making a sequestration order in circumstances where all of the prerequisites have been met; and, fifthly, that there are no other circumstances that would be sufficient for me to exercise the discretion against making what would otherwise be a proper order, at this time.
The last thing that the Respondent requested of me was to transfer the matter to the Federal Court so that all the matters could be dealt with by the one Court. As I explained during the course of the proceeding, I am unsure how that would occur, given that the only matter before the Federal Court at the moment is an appeal and that the making of the sequestration order is not a matter that is dealt with at first instance by an appellate court.
It does strike me, though, that, in making the order that I am about to make, that the Respondent may appeal my order. If that is what the Respondent does, then this matter could be heard at exactly the same time that the Full Court hears the appeal against the order made by Reeves J. In that way, the stated aim of the transferring of the matter to the Federal Court will be achieved.
For those reasons, I will make the sequestration order.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Vasta. Dated: 23 February 2021
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