Ganesh v Dobrowolski
[2020] FCCA 1013
•1 May 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GANESH v DOBROWOLSKI | [2020] FCCA 1013 |
| Catchwords: BANKRUPTCY – Application to review sequestration order – application to set aside Registrar’s orders – application to go behind judgment debt – hearing de novo – no sufficient grounds shown – application dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.52(1), 52(2) Federal Circuit Court of Australia Act 1999 (Cth), s.104 |
| Cases cited: Ali v Retail Decisions Pty Ltd [2012] FCA 1130 Conlan v Mladenis [2007] FCA 1129 Ganesh v Dobrowolski [2019] VSC 577 Ramsay Health Care Australia Pty Ltd v Compton (2017 ) 261 CLR 132 Stratton v Bowles (No2) [2015] FCA 43 |
| Applicant: | ANANDAVALLI GANESH |
| Respondent: | WALTER DOBROWOLSKI |
| File Number: | MLG 101 of 2019 |
| Judgment of: | Judge McNab |
| Hearing date: | 29 April 2020 |
| Date of Last Submission: | 29 April 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 1 May 2020 |
REPRESENTATION
| The Applicant appearing in person |
| Counsel for the Respondent: | Mr Champion |
| Solicitors for the Respondent: | Featherbys Lawyers |
| Counsel for the Trustee in Bankruptcy: | Mr Kohn |
ORDERS
The application for review filed by the Applicant debtor on 13 November 2019 be dismissed.
The estate of Anandavalli Ganesh be sequestrated under the Bankruptcy Act 1996 (Cth).
The Respondent creditor’s costs and the Trustee in Bankruptcy’s costs, including the costs of this proceeding, be paid from the estate of Anandavalli Ganesh in accordance with Part 40 of the Federal Court Rules 2011 (Cth), to be fixed in default of agreement.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 101 of 2019
| ANANDAVALLI GANESH |
Applicant
And
| WALTER DOBROWOLSKI |
Respondent
REASONS FOR JUDGMENT
Introduction
By an application filed 16 December 2019 the applicant (Ms Ganesh) seeks pursuant to section 104 of the Federal Circuit Court of Australia Act 1999 (Cth) to review a decision of the Court (by Registrar’s Order) where the Court ordered that:
a)the estate of Anandavalli Ganesh be sequestrated under the Bankruptcy Act1966 (Cth) (‘the Act’); and
b)the applicant creditors costs, including reserve costs, be fixed in the sum of $9,749.70 and paid from the estate of the respondent debtor in accordance with the Act.
This review proceeding is conducted as a hearing de novo and the Court begins afresh and exercises for itself any discretion decided or exercised by the Registrar: Conlan v Mladenis [2007] FCA 1129.
The applicant relies upon an affidavit sworn on 15 November 2019 in support of her application (with Exhibits AG–1 to AG–16, and additional exhibits AG17 to AG-25 filed on 29 April 2020). She also relies upon written submissions including written submissions which were filed shortly before the hearing.
Because of the restrictions imposed as a result of the COVID-19 health crisis, the hearing proceeded by way of a video hearing conducted through Microsoft Teams. The applicant represented herself and was assisted by her husband. The respondent was represented by Mr Champion of Counsel and the Trustee in Bankruptcy was represented by Mr Kohn of Counsel. The hearing proceeded without any issues arising in relation to the use of the technology (save that there was a short break in the transmission which was quickly rectified) and each party was able to present submissions and refer to documents without impediment.
Background
The act of bankruptcy relied upon by the respondent is the applicant’s non-compliance with a bankruptcy notice in the sum of $119,676.07. The basis of the bankruptcy notice is an Order obtained by the applicant against respondent in the Magistrates Court of Victoria (‘MCV’) on 16 July 2018.
In 2011 the applicant and her husband were investors in residential real estate using largely borrowed funds.
The respondent is a retired mortgage broker who was retained by the applicant to raise funds to complete the purchase of a property in Alfredton, a suburb of Ballarat (‘the property’). In August 2010, the applicant entered into a contract to purchase the property for $550,000.
In January 2011 a rescission notice was served by the vendors of the property and the applicant retained the respondent to secure finance to complete the purchase. Funds were raised through a loan in the sum of $440,000 from AMP Ltd (‘AMP’), however there remained a shortfall of funds necessary to complete the purchase.
As at the date of settlement (12 April 2011), the respondent provided the sum of $85,000 to enable the completion of the purchase.
The respondent says that the advance was made pursuant to a loan agreement made between the applicant and himself. The applicant denies the existence of any loan agreement and submits that the respondent made the advance voluntarily and without her knowledge. It is common ground that there was no written loan agreement in existence at the time the funds were advanced.
On 28 October 2013, the respondent commenced proceedings against the applicant in the MCV to recover the debt. The applicant’s husband made a complaint to the Credit and Investment Ombudsman (‘the Ombudsman’) which released findings on 26 April 2015. Those findings included criticism of the respondent’s conduct. The Ombudsman found at [36] of her report (‘the Report’) that the applicant:
a)was not aware that the respondent was the source of the loan funds of $85,000; but
b)received the benefit of those funds, and is therefore obliged to repay it.
The Ombudsman also found at [81] – [85] of the Report that the respondent had made reasonable enquiries about the applicant’s and her husband’s financial situation but had failed to take reasonable steps to verify that financial situation and carry out a complete preliminary assessment of suitability.
The Report also found that the respondent had recommended:
a)an unsuitable credit contract to the applicant and her husband when he submitted the loan application to AMP on 13 February 2011; and
b)that the consumer was in an unsuitable suitable credit contract when he loaned $85,000 to the consumer on 8 April 2011 (four days before the settlement of the property).
The Report noted at [86] that the applicant was seeking compensation for any loss that she suffered as a result of the respondent’s conduct, but at that point the Ombudsman was not in a position to assess that loss. The applicant was invited to provide information to the Ombudsman in relation to the loans arranged by the respondent by 10 May 2016 in order that the Ombudsman could make an assessment of loss. No material was provided to the Ombudsman by the applicant.
The proceeding issued in the MCV by the respondent on 28 October 2013 was stayed and then struck out as a result of the complaint to the Ombudsman.
On 5 April 2017, further proceedings against the applicant were commenced by the respondent in the MCV seeking to recover the advance. The applicant filed a defence to this claim by which she denied the existence of any loan agreement and said that she did not know the respondent had made the advance until after the purchase of the property had been completed. That defence also provided that she had made payments of approximately $3,000 to the respondent out of ‘kindness and sympathy’. She also made allegations that the respondent had breached the terms of the National Credit Act 2009 (Cth) and the Financial Services Industry Code of Practice by assisting her to obtain an unsuitable loan.
The applicant did not appear at the trial of the MCV proceeding which was listed for hearing on 16 July 2018. The matter proceeded in the absence of the applicant - with the respondent having to prove his claims by giving evidence tendering documents. The presiding Magistrate gave judgment for the respondent for the claim of $85,000 plus interest and costs.
On 13 August 2018, the applicant made an application for rehearing on the basis that the trial was conducted in her absence. That application was dismissed on 5 November 2018 after the applicant failed to appear at the hearing of the application to set aside the judgment.
The applicant did not bring an appeal against the MCV Orders of 16 July 2018 or 5 November 2018.
The bankruptcy notice was issued on 18 December 2018 and served on the applicant on 20 December 2018 by post. The bankruptcy notice was also served by email on 19 December 2018. The petitioning creditor relies upon the postal service of the bankruptcy notice and pleads 20 December 2018 as the date of service, stating that an act of bankruptcy was committed on 10 January 2019.
On 9 January 2019, the applicant commenced proceedings in the Supreme Court of Victoria against the respondent. Those proceedings raise claims that the respondent had breached the terms and National Credit Act 2009 (Cth) and the Financial Services Industry Code of Practice by assisting her to obtain an unsuitable loan. On 11 September 2019, that proceeding was summarily dismissed by Daly AsJ. Her honour published reasons, and at [56] of Ganesh v Dobrowolski [2019] VSC 577 stated:
[56] In my view, this proceeding is an abuse of process, at least insofar as it concerns the claims brought by Ms Ganesh. The matters raised by Ms Ganesh in the statement of claim, insofar as they concern the character of the advance, and the losses said to have been suffered by her as a result of the defendant’s alleged breach of duty were raised in her defence in the Magistrates’ Court proceeding, and could have been and should have been prosecuted in the Magistrates’ Court proceeding. Ms Ganesh’s claims traverse the same factual matters as those contained in her defence in the Magistrates’ Court proceeding. She chose not to attend the trial of the Magistrates’ Court proceeding, or her application for a rehearing. She could have brought a counterclaim seeking relief in relation to the allegations made by her in her defence, but chose not to do so. She could have appealed the decision in the Magistrates’ Court proceeding on a question of law, but chose not to do so.
Her honour noted that Ms Ganesh’s claims in the MCV proceeding exceeded the monetary jurisdiction of the MCV, however she also noted that Ms Ganesh could have transferred any counterclaim or cross-claim to an appropriate Court.
Her Honour found at [59] that the applicant had not provided any medical evidence to support claims that she was unable to attend court. At [58] her Honour stated:
[…] I appreciate that she has the care of a disabled son to attend to, and her family has faced financial turbulence in recent years, but I note that these difficulties have not prevented her from pursuing further education, pursuing investment opportunities, dealing with COSL, and bringing her claims in this proceeding.
On 1 October 2019, the applicant filed a notice of appeal against the Orders of Daly AsJ. She seeks to set aside those Orders and alternatively that she be given leave to appeal out of time the MCV Order made on 16 July 2018.
Applicant’s submissions
The applicant made submissions that:
(a)there was no agreement between her and the respondent and any finding that she owed a debt to him or was under any duty to repay the advance was an error;
(b)the advance was not to her benefit as it was in support of an unsuitable loan;
(c)the respondent had engaged in deceptive and misleading conduct, both by silence (in failing to advise that he had advance the funds) and by taking a benefit through receiving commissions as a result of procuring loans to support an uneconomic or financially disadvantageous transaction;
(d)that the Court should exercise the power to look behind the MCV judgement; and
(e)an appeal had been filed against the decision of Daly AsJ, and for that reason the respondent’s petition should be dismissed or the hearing of the petition should be adjourned.
As to the submission that there was no agreement between herself and the respondent, the applicant refers to an email from the respondent to heron 16 June 2011 at 2:08 pm.[1] That letter states:
I want to discuss the issue of the $85,000. At the last minute, the investor pulled out of giving you the money because she felt that you were too high a risk and had no possible means of paying her back. She felt that she would lose all the money because there had not been time to organise a second mortgage between her and your bank on one of the other properties. So she said NO.
So I decided that I would advance you the money to help you out. You had been stressed out enough. I borrowed the money quickly and sent a cheque to Ballarat to meet settlement. I did this on the basis that I would be able to refinance other properties with enough equity to pay me out. This of course depended on you being able to supply tax returns and Assessment Notices which showed you could service the debt. I assured my wife that you and Ganesh – whatever else was happening in your lives – had a commitment to your children and to repaying the debt as soon as we could refinance again.
My wife now believes that we have an $85,000 debt which we will have to pay back because of my trust in you and Ganesh. She knows that no one – not even your family would have done this for you.
So, it is now your turn to assure and help me, so that I can say to my wife – see my trust and faith – is being rewarded. This is the plan for us to complete the transaction with Ana.
I wanted you to know the real situation so that we can start the process as soon as possible. This may involve us meeting in the next few days to see what is required. One of the things we need to discuss is how I protect my interests since there is no record of me having lent you any money and no agreement in place, should you not be in a position in refinance at all.
(copied exactly)
[1] Exhibit AG-11 to Ms Ganesh’s affidavit affirmed 15 November 2019.
Ms Ganesh sent an email response on the same day (16 June 2011) at 7.44pm[2] which stated in relevant parts:
[2] Ibid, Exhibit AG-11A.
It has been very sad reading your email and I am extremely grateful to you and I have no words to describe my feelings at this tremendous sacrifice.
Rest be assured that as soon as we are able to I shall be increasing my limits on GSquare with NAB and to pay youn back the amount of $85K plus will be the very first thing I shall ever do.
Please do not worry at all about that. As with the vendor of Sturt St who also like yourself and your wife have been very patient with this whole deal , my word to my vendor mearnt everything more than life and the same with your help.
As your company’s adage, you have made my dream come true and it has been all your great hardwork.
I pray that you recover completely and please reassure your wife not to worry at all as I shall today endeavour to pay more not less than what you have sacrificed. Do not worry at all.
(errors in original)
Ms Ganesh submitted to the Court that the email from the respondent of 16 June 2011 demonstrated that there was no agreement. It was submitted that by making a claim in the MCV based on an agreement indicated that the respondent had committed perjury. It was also submitted that the MCV had been misled because that email had not been placed before the Court.
As to the submission that the respondent had mislead the MCV regarding the existence of an agreement, Ms Ganesh relied upon a partial transcript of the hearing conducted in the MCV (‘the transcript)) which made no reference to that document but did refer to the email from the applicant admitting the debt.[3]
[3] Ibid, Exhibit AG-10.
Ms Ganesh relied upon a partial transcript of the hearing conducted in the MCV which made no reference to that document but did refer to the email from the applicant admitting the debt.
The transcript relied upon by Ms Ganesh is not a complete transcript. It is apparent from the transcript that Counsel for the respondent put forward matters to the Court adverse to the respondent, in particular the findings of the Ombudsman.
I accept that a bundle of documents was tendered before the MCV, including the email from the respondent of 16 June 2011. I was advised by Mr Champion of Counsel, who appeared in the MCV hearing, that the bundle of tendered documents included that email. The chain of correspondence which is referred to in the partial transcript shows that the applicant was actively seeking further funding of $85,000 from sources other than the respondent.
Consideration
Section 52(2)(b) of the Act provides that the Court may dismiss the respondent’s petition if there is ‘sufficient cause a sequestration order ought not be made’. In Stratton v Bowles (No2) [2015] FCA 43, Beach J stated at [27]-[30]:
[27] A petitioning creditor has a “prima facie right” to a sequestration order once proof of the matters required by s 52(1) has been satisfied. Nevertheless, there is a discretion to refuse such an order for inter alia “other sufficient cause” (s 52(2)(b)).
[28] In relation to the concept of “other sufficient cause” a number of points should be made.
[29] First, the circumstances which may constitute “other sufficient cause” are extremely variable, and it is inappropriate to catalogue or circumscribe them.
[30] Second, even if “other sufficient cause” has been shown, that merely enlivens the court’s discretion to refuse to make a sequestration order. The power in s 52(2) is permissive, not mandatory. Even if a debtor can bring himself or herself within s 52(2)(b), that does not entitle him or her to have a sequestration order refused.
(citations omitted)
Beach J also considered the proper approach by a Court to exercise a discretion go behind a judgement. At [32] his honour stated:
[32] Generally, a court has a discretion to go behind a judgment. This may be exercised where:
(a) the judgment was obtained by default or compromise;
(b) the judgment was procured by or tainted with fraud or collusion; or
(c) the judgment was obtained following an adjudication on the merits where both parties appeared, but where there are substantial reasons for questioning whether there is in substance a debt.
[33] In each case a court may go behind the judgment to ascertain whether the judgment is founded on a real debt. This is a s 52(1)(c) question and see generally Ali v Retail Decisions Pty Ltd [2012] FCA 1130 at [17]-[20] per Bromberg J, although some authorities have also brought this within s 52(2)(b).
[34] Further, a court should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation for the bankruptcy proceedings, provided that the appeal is based on genuine and arguable grounds. This is a s 52(2)(b) question. At the least, the existence of an appeal or leave to appeal application based upon genuine and arguable grounds may provide a basis for adjourning the hearing of the creditor’s petition, even if it does not provide a basis for ultimately refusing a sequestration order.
[35] But the mere fact that an appeal has been lodged does not without more give rise to a duty to postpone the hearing of the petition.
[36] The judgment debtor must point to grounds having “a real chance of success on appeal”. Mere assertion is not sufficient. The onus is on the judgment debtor to establish the substantial nature of the grounds of challenge.
[37] Of course, a court is not bound to postpone the hearing of a petition or to refuse to make a sequestration order to enable the judgment debtor to invoke all possible avenues of appeal. One ought not underestimate the capacity of judgment debtors to innovatively invoke new grounds of challenge and new proceedings in an attempt to overturn judgments against them. Nevertheless, the court in a particular case should, where an appeal or an application for leave to appeal has been lodged against a judgment and s 52(2)(b) has been invoked by the judgment debtor, properly inquire into the grounds of challenge and its substance in order to ascertain, first, whether the condition in s 52(2)(b) has been satisfied and, second, whether the discretion to adjourn the petition or the discretion to refuse to make the sequestration order has been enlivened and should be invoked.
(citations omitted)
The submissions raised by Ms Ganesh regarding whether the petition ought be set aside by reason of the appeal having been instituted in the Supreme Court of Victoria do not raise arguments or sufficiently show that the grounds of appeal have any reasonable prospect of success are reasonably arguable.
The judgment of Daly AsJ sets out in a detailed way the basis of the judgment, and the key findings made at [56] of that judgment seem to be unimpeachable. The grounds of appeal which assert ‘miscarriage of justice’, ‘bringing administration of justice into disrepute’; ‘perjury must be heard’; ‘lacking in fairness’ and ‘applicant’s right to a fair hearing affected’ are put in a very general way and effectively are disputing the findings made by her Honour without pointing to legal error.
The grounds of appeal overlooked a fundamental finding made by her Honour that Ms Ganesh was seeking to run arguments in the Supreme Court of Victoria that could have and should have been run in the MCV or in the appropriate Court if Ms Ganesh wished to raise a counterclaim which exceeded the jurisdictional limit of the MSV.
Ms Ganesh has not established a substantial reason to go behind the MCV Order for these reasons:
a)The transcript, albeit partial, shows at page 3 at lines 29–36, that the respondent gave evidence that he had a conversation with Ms Ganesh on or about 8 April 2011 that he would advance a cheque in the sum of $85,000 and that she would pay it back in three months.
b)There was also evidence before the MCV that the respondent had advanced the sum of $85,000 and this was proved by a copy of a cheque drawn on the respondent’s bank account which advanced the $85,000. The payee of the cheque was the vendor of the property. Ms Ganesh became the registered proprietor as purchaser on or about 12 April 2011.
c)A debit of $85,000 from the respondent’s bank account is also evidence of the advance, as is the subsequent admission of the indebtedness in the applicant’s email dated 16 June 2011. There was evidence that she needed those funds in order to complete the purchase of the property. She had committed to the purchase of the property in August 2010 before she retained the respondent in 2011.
d)It was open for the Court to find that the respondent had advanced funds and the applicant agreed to pay them back, or alternatively: (i) that even if she did not know where the money came from the applicant would be unjustly enriched if she retained that money; (ii) on the basis of monies had and received.
e)There was evidence before the MCV that Ms Ganesh needed funds to settle on the property and that she obtained those funds from the respondent and by her letter of 16 June 2011 clearly stated that she would repay that money. Any arguments about whether there was an agreement and illegality and breaches of the National Credit Act 2009 (Cth) could have been raised in the MCV hearing.
The applicant has raised detailed arguments in support of the submissions she makes in written submissions. I have read those submissions but find that the arguments, which I have summarised, do not give rise to a basis for going behind the judgement of the MCV.
The applicant faces a fundamental problem that she could have raised by way of defence in the MCV. It is significant that the applicant failed to attend both the MCV hearing and the application for rehearing that she filed. She has put nothing before the Court by way of medical evidence to undermine the findings of Daly AsJ regarding the absence of evidence to explain those non-appearances.
I am not satisfied that a substantial reason has been shown to question whether there is in truth and reality a debt due to the respondent: Ramsay Health Care Australia Pty Ltd v Compton (2017 ) 261 CLR 132 at [55].
In these circumstances the Court finds that it is satisfied that the debt is still owing under section 52(1)(c) of the Act.
Otherwise it is satisfied of the proofs under section 52(1) of the Act. The application for review should be dismissed and the decision of the Registrar affirmed and a sequestration Order made.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Judge McNab
Associate:
Date: 1 May 2020
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