FEDERAL COURT OF AUSTRALIA
Ghosh v Miller (No 2) [2017] FCA 890
Appeal from: Miller v Ghosh (No 3) [2016] FCCA 2491 File number(s): NSD 1735 of 2016 Judge(s): FARRELL J Date of judgment: 8 August 2017 Catchwords: BANKRUPTCY – appeal against sequestration order – application for leave to appeal decision to substitute petitioning creditor – application for leave to appeal grant of leave for substituted creditor to file amended creditor’s petition – whether amended creditor’s petition should have been dismissed owing to an available set-off – whether primary judge failed to appropriately consider extant litigation – whether the appellant was solvent at the time the sequestration order was made – appeal dismissed Legislation: Bankruptcy Act 1966 (Cth) ss 40, 43, 44, 47, 49, 52, 58, 60
Foreign Judgments Act 1991 (Cth) s 15
Legal Profession Act 2004 (NSW) s 368
Suitors’ Fund Act 1951 (NSW)
Cases cited: Australian Beverage Distributors Pty Ltd v Evans and Tate Premium Wines Pty Ltd (2007) 69 NSWLR 374; NSWCA 57
Calandra v Murden [2015] NSWCA 231
Christou v Demandem Holdings Pty Ltd [2012] FCA 695
Dean v Q.U.F. Industries Ltd (1981) 51 FLR 317; FCA 76
Frumar v Owners of Strata Plan 36957 [2010] NSWCA 172
Ghosh v Miller [2016] FCA 1293
Ghosh v Miller [2016] NSWSC 430
Ghosh v Miller [2017] NSWSC 791
Ghosh v Miller (CTTT Appeal) [2014] NSWDC 228
Hyams v Elder Smith Goldsbrough Mort Ltd (1976) 133 CLR 637; HCA 18
Investec Australia Finance Pty Limited v Naude [2016] FCA 731
Ling v Enrobook Pty Ltd (1997) 74 FCR 19; FCA 226
McNamara v Langford (1931) 45 CLR 267; HCA 27
Miller v Ghosh [2016] FCCA 1191
Miller v Ghosh (No 2) [2016] FCCA 1192
Miller v Ghosh (No 3) [2016] FCCA 2491
Re Brent Hughes; ex parte Westpac Banking Corporation [1997] FCA 1324
Re Pollack; ex parte Deputy Commissioner of Taxation (1991) 32 FCR 40; FCA 651
SZRUR v Minister for Immigration and Border Protection (2012) 216 FCR 445; FCAFC 146
Talacko v Bennett (2017) 91 ALJR 564; HCA 15
Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 1106
Date of hearing: 27 April 2017, 3 May 2017 Date of last submissions: 3 May 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 132 Counsel for the Appellant: Ms B K Nolan Solicitor for the Appellant: Rudra Legal Corporation Pty Ltd Counsel for the Respondent: Mr M W E Maconachie Solicitor for the Respondent: Higgins & Dix Lawyers & Conveyancers ORDERS
NSD 1735 of 2016 BETWEEN: RATNA GHOSH
Appellant
AND: RODNEY JAMES MILLER
Respondent
JUDGE:
FARRELL J
DATE OF ORDER:
8 AUGUST 2017
THE COURT ORDERS THAT:
1.The appeal is dismissed.
2.The respondent’s costs of and incidental to the appeal be taxed and paid from the appellant’s bankrupt estate.
Note: Entry of orders…
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- Ghosh v Miller (No 2) [2017] FCA 890
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- [2017] FCA 890
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CaseChat Overview and Summary
In the matter of Ghosh v Miller (No 2), the Federal Circuit Court was called upon to determine whether to dismiss the appeal brought by Dr Ghosh against a sequestration order made in favour of Mr Miller. The appeal presented several issues, including whether the primary judge failed to appropriately consider an available set-off, and whether Dr Ghosh was solvent at the time the sequestration order was made. The court dismissed the appeal and ordered that the respondent's costs of and incidental to the appeal be taxed and paid from the appellant's bankrupt estate. The reasoning behind the court's decision was based on the fact that the requirements of s 40(1)(g) were satisfied at the time Baycorp's bankruptcy notice was issued and the act of bankruptcy occurred. Additionally, Dr Ghosh had not provided sufficient evidence to demonstrate that she was solvent at the time the petition was heard. The court found that the primary judge did not err in their decision, and therefore the appeal was dismissed.
Orders
Orders of the court
1. The appeal is dismissed.
2. The respondent’s costs of and incidental to the appeal be taxed and paid from the appellant’s bankrupt estate.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Dr Ghosh relied on the evidence of her financial circumstances as at 30 September 2016 submitted in support of the application to stay the sequestration order included in the appeal book. In her Honour’s reasons ([2016] FCA 1293) published on 2 November 2016, Markovic J summarised that evidence at [9]-[14] as follows:THE FACTS9 Dr Ghosh’s amended interlocutory application is supported by an affidavit affirmed by her on 18 October 2016. She was also examined and cross examined at the hearing. Relevantly her evidence is that:(1)she is separated from her husband, although not divorced. There is one child of the marriage who is 11 years old, is autistic and is cared for by and resides with her;(2)in 2013 her husband commenced a proceeding in the Family Court of Australia for property orders in respect of their marriage (the Family Court Proceeding). That proceeding is dormant. No orders have been made in it and it has not been listed for hearing;(3)Dr Ghosh and her husband are the registered proprietors as joint tenants of two properties: one at 167 Lytton St, East Brisbane, Queensland (the East Brisbane Property) and the other at 56 Antoine St, Rydalmere, New South Wales (the Rydalmere Property). The East Brisbane Property is currently vacant and is managed by Dr Ghosh’s husband. The Rydalmere Property is occupied by Dr Ghosh’s husband. The East Brisbane Property and Rydalmere Property are subject to mortgages in favour of the Commonwealth Bank securing an amount of $488,000. A comparative market analysis prepared for the East Brisbane Property dated 21 October 2016 values it at between $900,000 to $1.2 m and a marketing appraisal dated 21 October 2016 for the Rydalmere Property says that its potential sale price is in the range of $940,000 to $1 m;(4)in response to a question about her options for realising her share in the East Brisbane Property Dr Ghosh said that prior to the making of the sequestration order she had a loan approved by the Commonwealth Bank, that was pending from June to September 2016, to increase her debt by $250,000. Its purpose was to pay off her debts. Dr Ghosh would rather not sell that property but she indicated that sale was a possibility and that the property could be sold readily. She also said that she could sell her half share in the property to her husband and that he would be more likely to agree to that than an outright sale;(5)Dr Ghosh understands that when the Family Court Proceeding is finally concluded she is likely to receive more than 50% of the matrimonial property because she has the primary care of their son;(6)Dr Ghosh is a medical practitioner employed by Ghoband Pty Ltd (Ghoband) trading as Charlestown Surgery. In the financial year ended 30 June 2016, Dr Ghosh received approximately $80,000 from her employment. She holds one of the two issued shares in Ghoband with the other being held by her husband. As at 30 June 2016 Ghoband had negative equity of $346.78;(7)on 6 August 2013 Dr Ghosh commenced the Defamation Proceeding in the District Court of New South Wales (the District Court). On 21 March 2016, on Dr Ghosh’s application, the Defamation Proceeding was transferred to the Supreme Court because Dr Ghosh’s claim for damages exceeds the jurisdictional limit of the District Court;(8)in the Defamation Proceeding and in related proceedings in the District Court and the Local Court of New South Wales (the Local Court) there have been a number of costs orders made at various times both against and in favour of Dr Ghosh in relation to Mr Miller and the other defendants in the Defamation Proceeding. Some of those costs orders have been assessed and are the subject of judgments and some of those costs orders and/or judgments in respect thereof are subject to appeal. The largest of these is an order for costs made against Dr Ghosh by Fagan J in the Supreme Court for $12,000;(9)the Defamation Proceeding is next listed before Rothman J on 28 October 2016 at which time Dr Ghosh understands his Honour will likely deliver his reserved judgment in relation to various strike out applications heard by him on 12 August 2016. Dependent upon his Honour’s orders it is possible that the Defamation Proceeding may then be set down for hearing;(10)Dr Ghosh believes that she is able to pay her debts, that her assets exceed her liabilities and that she is solvent.Dr Ghosh’s statement of affairs10 Dr Ghosh has prepared a statement of affairs which she has provided to the Trustee. In it Dr Ghosh discloses that:•she received gross income of $80,000 for the financial year ended 30 June 2016;• her expected income for the current financial year is $100,000;•she jointly owns with her husband the East Brisbane Property which is security for a loan of $488,000. She also has a half share in the Rydalmere Property which is currently in her husband’s possession;• she holds one share valued at $1.00 in Ghoband;•she has three debtors, including Mr Miller, who owe her a total of $27,628.40 all of which she says is recoverable;• since 2014 she has sold three properties for a total of $3,176,054.65;•there is a superannuation policy in the name of Ghoband Pty Ltd Superannuation;•in January 2016 she paid $11,265 to Baycorp Collections PDL (Australia) Pty Ltd (Baycorp);•she has another asset, the Defamation Proceeding, which she values at $750,000;•the combined estimated resale of the East Brisbane Property and the Rydalmere Property is $2.4 m;•she has two unsecured creditors, the first, collectively NineMSN Pty Limited, NBN Limited and Katie Gregory (the NBN Parties), and the second, Mr Miller, who have costs orders in their favour for $16,000 and $12,000 respectively. 11 The Trustee has sworn an affidavit in which he provides his observations, having considered the statement of affairs. In relation to the assets disclosed by Dr Ghosh in her statement of affairs, the Trustee notes that:(1)Dr Ghosh disclosed a superannuation policy in the name of Ghoband Pty Limited Superannuation but provided no balance of the funds in the policy. He further notes that, subject to certain exceptions, superannuation is generally an excluded asset from a bankrupt estate;(2)the Trustee has not yet engaged valuers to value the East Brisbane Property and the Rydalmere Property, of which Dr Ghosh is a joint owner, nor has he, in accordance with his usual practice, lodged caveats over those properties to secure the bankrupt estate’s interest in any equity in them. He notes that the Commonwealth Bank has confirmed that the amount owing to it that is secured over the properties is $488,066.83 and that the loan is not in default;(3)given the existence of the Family Court Proceeding, the East Brisbane Property and the Rydalmere Property may become subject to that proceeding which may affect the ability to sell them in the short to medium term and/or may lead to an amendment in the ownership interests in those properties;(4)Dr Ghosh disclosed that she holds one share in Ghoband. The Trustee understands that Ghoband may act as trustee of Dr Ghosh’s superannuation fund. The Trustee is aware through searches that he has undertaken that Ghoband is the registered owner of an unencumbered property located at 49 Patricia Avenue, Charlestown, NSW (the Charlestown Property) although he was unable to ascertain from the search whether Ghoband owns the Charlestown Property in its capacity as trustee of the Ghoband Pty Ltd Superannuation Fund or whether it is beneficially owned by Ghoband in its own right. He notes that the Charlestown property does not appear in the balance sheet of Ghoband;(5)there are three debtors disclosed in the statement of affairs, one of whom is Mr Miller for the sum of $3,300 arising from a fixed sum costs order in District Court proceedings 2014/247046. The Trustee understands that an order was also made that a certificate pursuant to the Suitors’ Fund Act 1951 (NSW) be issued and that, despite the Department of Justice’s advice that the certificate should not have been issued, that Department agreed to an ex gratia payment of $3,300 to Mr Miller of which $1,980 was to be paid to Dr Ghosh. Accordingly, the Trustee expects that the sum of $1,980 would be recoverable. However, on the basis that the creditor’s petition was based on total debts owed by Dr Ghosh to Mr Miller of $15,234.32 and further costs orders are now claimed by Mr Miller against the estate, the Trustee is of the opinion that Mr Miller would appear to be a net creditor of the estate and, as such, no further amounts are likely to be recoverable from him. The Trustee is not in possession of any documentation evidencing the two other debtors’ financial ability to pay the debts owing to Dr Ghosh;(6)based on his review of Ghoband’s profit and loss statement for the financial year ended 30 June 2016, of the $80,000 in income received by Dr Ghosh, $70,000 appears to be in the form of superannuation and $10,000 in the form of wages and salaries. He also notes that the profit and loss statement provides, as comparative figures, a profit and loss statement for the year ended 30 June 2015 and that this shows that Dr Ghosh was paid $71,027.71 in superannuation and $45,761.38 in wages and salaries in that financial year.12 The Trustee identified the following discrepancies in the statement of affairs:(1) in question 9 of part A of the statement of affairs, which requires the disclosure of a summary of income for the past 12 months, Dr Ghosh failed to record any income received from rent payable by tenants of her two known investment properties. The Trustee believes that these properties are currently vacant but, from his review of bank statements for an account held jointly in Dr Ghosh’s name with her former husband, it appears that she received regular rental income deposits from real estate property managers;(2) in question 12 of part A of the statement of affairs, which requires disclosure of current employment, the trustee notes that an amount of $7,600 is paid annually by Dr Ghosh’s employer in superannuation. However Dr Ghosh has responded to question 15, which asks whether any party makes a superannuation contribution on behalf of the bankrupt, in the negative;(3) Dr Ghosh has not listed any bank accounts in response to question 23 which asks the bankrupt to list all accounts held, including any joint or overdrawn accounts, with any banks, building societies, credit unions or other financial institutions in the last 12 months. However, the Trustee has been provided with statements of account by the Newcastle Permanent Building Society for an account in the name of Dr Ghosh and her husband as trustee for the Bandy Family Trust for the period 30 September 2015 to 11 October 2016;(4) in response to question 33, which asks the bankrupt whether he or she has sold transferred or given away any assets worth more than $1,000 in the last five years, Dr Ghosh lists three properties but does not include the transfer by her of a 1% share in the Charlestown Property to her husband on 15 October 2014 nor the transfer of that property on 8 December 2014 to Ghoband for nil consideration.13 The Trustee also set out his understanding of Dr Ghosh’s creditors, none of which he has verified. They are:(1)Baycorp in the sum of $68,840.24 for various judgments and costs orders. In addition, Baycorp has provided an estimate of $25,000 for costs that are yet to be assessed;(2)Blue Ribbon Legal in the sum of $2,915 plus interest for work performed as a costs assessor;(3)jointly with her husband, the Commonwealth Bank in the sum of $488,066.83. That debt is secured by way of first registered mortgages over the East Brisbane Property and the Rydalmere Property;(4)Mr Miller in the sum of $54,317.87 for costs, including interest and enforcement costs, that have either been assessed or were gross sum orders and a further sum of $135,448.63 for costs orders in respect of which quantum has not been assessed or agreed;(5)The NBN Parties in the sum of $20,934.59 for judgments in their favour. There are also other outstanding costs orders in favour of the NBN parties which have not been the subject of an assessment. Their solicitors estimate that those costs are in the range of $80,000 to $100,000.14 It is clear based on the Trustee’s evidence and Dr Ghosh’s evidence in cross examination that she has not included all of her creditors or the full amount for which those listed are creditors in her statement of affairs. Dr Ghosh agreed in cross examination that she is also known by another name, Ros Bandi, a matter not disclosed in her statement of affairs.
Evidence
Evidence Before The Court
Ms Nolan argued that the primary judge should have, but did not, take into account as a “sufficient cause” to refuse to make the sequestration order that Dr Ghosh had not had the benefit of being able to resist a bankruptcy notice on the basis that Mr Miller would not have been able to satisfy s 40(1)(g) at the time the order for substitution was made (11 May 2016). Having regard to the authority of Hyams and the fact that the requirements of s 40(1)(g) were satisfied at the time Baycorp’s bankruptcy notice was issued and the act of bankruptcy occurred, this argument must be rejected.Should the sequestration order be set aside because new evidence establishes that Dr Ghosh was solvent? I accept Dr Ghosh’s submission that it is not the purpose of sequestration under the Bankruptcy Act to force solvent debtors to pay debts they are unwilling, rather than unable, to pay. Dr Ghosh contends (and it is not contested) that on 29 January 2017 she paid the debt claimed by Baycorp in its creditor’s petition. Dr Ghosh also claims that she tendered payment to Mr Miller of the amounts claimed in the further amended creditor’s petition but that tender was refused: that issue is contested. An act of bankruptcy having occurred, the onus is on Dr Ghosh to satisfy the Court that she was solvent at the time the petition was heard, albeit that the evidence is likely to be relevantly the same in this case as at the time the sequestration order was made. Dr Ghosh relied on the evidence of her financial circumstances as at 30 September 2016 submitted in support of the application to stay the sequestration order included in the appeal book. In her Honour’s reasons ([2016] FCA 1293) published on 2 November 2016, Markovic J summarised that evidence at [9]-[14] as follows:THE FACTS9 Dr Ghosh’s amended interlocutory application is supported by an affidavit affirmed by her on 18 October 2016. She was also examined and cross examined at the hearing. Relevantly her evidence is that:(1)she is separated from her husband, although not divorced. There is one child of the marriage who is 11 years old, is autistic and is cared for by and resides with her;(2)in 2013 her husband commenced a proceeding in the Family Court of Australia for property orders in respect of their marriage (the Family Court Proceeding). That proceeding is dormant. No orders have been made in it and it has not been listed for hearing;(3)Dr Ghosh and her husband are the registered proprietors as joint tenants of two properties: one at 167 Lytton St, East Brisbane, Queensland (the East Brisbane Property) and the other at 56 Antoine St, Rydalmere, New South Wales (the Rydalmere Property). The East Brisbane Property is currently vacant and is managed by Dr Ghosh’s husband. The Rydalmere Property is occupied by Dr Ghosh’s husband. The East Brisbane Property and Rydalmere Property are subject to mortgages in favour of the Commonwealth Bank securing an amount of $488,000. A comparative market analysis prepared for the East Brisbane Property dated 21 October 2016 values it at between $900,000 to $1.2 m and a marketing appraisal dated 21 October 2016 for the Rydalmere Property says that its potential sale price is in the range of $940,000 to $1 m;(4)in response to a question about her options for realising her share in the East Brisbane Property Dr Ghosh said that prior to the making of the sequestration order she had a loan approved by the Commonwealth Bank, that was pending from June to September 2016, to increase her debt by $250,000. Its purpose was to pay off her debts. Dr Ghosh would rather not sell that property but she indicated that sale was a possibility and that the property could be sold readily. She also said that she could sell her half share in the property to her husband and that he would be more likely to agree to that than an outright sale;(5)Dr Ghosh understands that when the Family Court Proceeding is finally concluded she is likely to receive more than 50% of the matrimonial property because she has the primary care of their son;(6)Dr Ghosh is a medical practitioner employed by Ghoband Pty Ltd (Ghoband) trading as Charlestown Surgery. In the financial year ended 30 June 2016, Dr Ghosh received approximately $80,000 from her employment. She holds one of the two issued shares in Ghoband with the other being held by her husband. As at 30 June 2016 Ghoband had negative equity of $346.78;(7)on 6 August 2013 Dr Ghosh commenced the Defamation Proceeding in the District Court of New South Wales (the District Court). On 21 March 2016, on Dr Ghosh’s application, the Defamation Proceeding was transferred to the Supreme Court because Dr Ghosh’s claim for damages exceeds the jurisdictional limit of the District Court;(8)in the Defamation Proceeding and in related proceedings in the District Court and the Local Court of New South Wales (the Local Court) there have been a number of costs orders made at various times both against and in favour of Dr Ghosh in relation to Mr Miller and the other defendants in the Defamation Proceeding. Some of those costs orders have been assessed and are the subject of judgments and some of those costs orders and/or judgments in respect thereof are subject to appeal. The largest of these is an order for costs made against Dr Ghosh by Fagan J in the Supreme Court for $12,000;(9)the Defamation Proceeding is next listed before Rothman J on 28 October 2016 at which time Dr Ghosh understands his Honour will likely deliver his reserved judgment in relation to various strike out applications heard by him on 12 August 2016. Dependent upon his Honour’s orders it is possible that the Defamation Proceeding may then be set down for hearing;(10)Dr Ghosh believes that she is able to pay her debts, that her assets exceed her liabilities and that she is solvent.Dr Ghosh’s statement of affairs10 Dr Ghosh has prepared a statement of affairs which she has provided to the Trustee. In it Dr Ghosh discloses that:•she received gross income of $80,000 for the financial year ended 30 June 2016;• her expected income for the current financial year is $100,000;•she jointly owns with her husband the East Brisbane Property which is security for a loan of $488,000. She also has a half share in the Rydalmere Property which is currently in her husband’s possession;• she holds one share valued at $1.00 in Ghoband;•she has three debtors, including Mr Miller, who owe her a total of $27,628.40 all of which she says is recoverable;• since 2014 she has sold three properties for a total of $3,176,054.65;•there is a superannuation policy in the name of Ghoband Pty Ltd Superannuation;•in January 2016 she paid $11,265 to Baycorp Collections PDL (Australia) Pty Ltd (Baycorp);•she has another asset, the Defamation Proceeding, which she values at $750,000;•the combined estimated resale of the East Brisbane Property and the Rydalmere Property is $2.4 m;•she has two unsecured creditors, the first, collectively NineMSN Pty Limited, NBN Limited and Katie Gregory (the NBN Parties), and the second, Mr Miller, who have costs orders in their favour for $16,000 and $12,000 respectively. 11 The Trustee has sworn an affidavit in which he provides his observations, having considered the statement of affairs. In relation to the assets disclosed by Dr Ghosh in her statement of affairs, the Trustee notes that:(1)Dr Ghosh disclosed a superannuation policy in the name of Ghoband Pty Limited Superannuation but provided no balance of the funds in the policy. He further notes that, subject to certain exceptions, superannuation is generally an excluded asset from a bankrupt estate;(2)the Trustee has not yet engaged valuers to value the East Brisbane Property and the Rydalmere Property, of which Dr Ghosh is a joint owner, nor has he, in accordance with his usual practice, lodged caveats over those properties to secure the bankrupt estate’s interest in any equity in them. He notes that the Commonwealth Bank has confirmed that the amount owing to it that is secured over the properties is $488,066.83 and that the loan is not in default;(3)given the existence of the Family Court Proceeding, the East Brisbane Property and the Rydalmere Property may become subject to that proceeding which may affect the ability to sell them in the short to medium term and/or may lead to an amendment in the ownership interests in those properties;(4)Dr Ghosh disclosed that she holds one share in Ghoband. The Trustee understands that Ghoband may act as trustee of Dr Ghosh’s superannuation fund. The Trustee is aware through searches that he has undertaken that Ghoband is the registered owner of an unencumbered property located at 49 Patricia Avenue, Charlestown, NSW (the Charlestown Property) although he was unable to ascertain from the search whether Ghoband owns the Charlestown Property in its capacity as trustee of the Ghoband Pty Ltd Superannuation Fund or whether it is beneficially owned by Ghoband in its own right. He notes that the Charlestown property does not appear in the balance sheet of Ghoband;(5)there are three debtors disclosed in the statement of affairs, one of whom is Mr Miller for the sum of $3,300 arising from a fixed sum costs order in District Court proceedings 2014/247046. The Trustee understands that an order was also made that a certificate pursuant to the Suitors’ Fund Act 1951 (NSW) be issued and that, despite the Department of Justice’s advice that the certificate should not have been issued, that Department agreed to an ex gratia payment of $3,300 to Mr Miller of which $1,980 was to be paid to Dr Ghosh. Accordingly, the Trustee expects that the sum of $1,980 would be recoverable. However, on the basis that the creditor’s petition was based on total debts owed by Dr Ghosh to Mr Miller of $15,234.32 and further costs orders are now claimed by Mr Miller against the estate, the Trustee is of the opinion that Mr Miller would appear to be a net creditor of the estate and, as such, no further amounts are likely to be recoverable from him. The Trustee is not in possession of any documentation evidencing the two other debtors’ financial ability to pay the debts owing to Dr Ghosh;(6)based on his review of Ghoband’s profit and loss statement for the financial year ended 30 June 2016, of the $80,000 in income received by Dr Ghosh, $70,000 appears to be in the form of superannuation and $10,000 in the form of wages and salaries. He also notes that the profit and loss statement provides, as comparative figures, a profit and loss statement for the year ended 30 June 2015 and that this shows that Dr Ghosh was paid $71,027.71 in superannuation and $45,761.38 in wages and salaries in that financial year.12 The Trustee identified the following discrepancies in the statement of affairs:(1) in question 9 of part A of the statement of affairs, which requires the disclosure of a summary of income for the past 12 months, Dr Ghosh failed to record any income received from rent payable by tenants of her two known investment properties. The Trustee believes that these properties are currently vacant but, from his review of bank statements for an account held jointly in Dr Ghosh’s name with her former husband, it appears that she received regular rental income deposits from real estate property managers;(2) in question 12 of part A of the statement of affairs, which requires disclosure of current employment, the trustee notes that an amount of $7,600 is paid annually by Dr Ghosh’s employer in superannuation. However Dr Ghosh has responded to question 15, which asks whether any party makes a superannuation contribution on behalf of the bankrupt, in the negative;(3) Dr Ghosh has not listed any bank accounts in response to question 23 which asks the bankrupt to list all accounts held, including any joint or overdrawn accounts, with any banks, building societies, credit unions or other financial institutions in the last 12 months. However, the Trustee has been provided with statements of account by the Newcastle Permanent Building Society for an account in the name of Dr Ghosh and her husband as trustee for the Bandy Family Trust for the period 30 September 2015 to 11 October 2016;(4) in response to question 33, which asks the bankrupt whether he or she has sold transferred or given away any assets worth more than $1,000 in the last five years, Dr Ghosh lists three properties but does not include the transfer by her of a 1% share in the Charlestown Property to her husband on 15 October 2014 nor the transfer of that property on 8 December 2014 to Ghoband for nil consideration.13 The Trustee also set out his understanding of Dr Ghosh’s creditors, none of which he has verified. They are:(1)Baycorp in the sum of $68,840.24 for various judgments and costs orders. In addition, Baycorp has provided an estimate of $25,000 for costs that are yet to be assessed;(2)Blue Ribbon Legal in the sum of $2,915 plus interest for work performed as a costs assessor;(3)jointly with her husband, the Commonwealth Bank in the sum of $488,066.83. That debt is secured by way of first registered mortgages over the East Brisbane Property and the Rydalmere Property;(4)Mr Miller in the sum of $54,317.87 for costs, including interest and enforcement costs, that have either been assessed or were gross sum orders and a further sum of $135,448.63 for costs orders in respect of which quantum has not been assessed or agreed;(5)The NBN Parties in the sum of $20,934.59 for judgments in their favour. There are also other outstanding costs orders in favour of the NBN parties which have not been the subject of an assessment. Their solicitors estimate that those costs are in the range of $80,000 to $100,000.14 It is clear based on the Trustee’s evidence and Dr Ghosh’s evidence in cross examination that she has not included all of her creditors or the full amount for which those listed are creditors in her statement of affairs. Dr Ghosh agreed in cross examination that she is also known by another name, Ros Bandi, a matter not disclosed in her statement of affairs.
Decision
Reasons for decision
Baycorp lodged its creditor’s petition dated 2 February 2015 in the Federal Circuit Court on that day.9 February 2015: stay of Local Court judgments and September 2014 costs order Dr Ghosh sought leave to appeal Atkinson LCM’s decision in the Supreme Court of New South Wales (proceedings 2014/333115). On 9 February 2015, in those proceedings, Garling J made orders staying the Local Court judgments and the December 2014 costs order until further order. On 17 July 2015, Beech-Jones J made a gross sum costs order against Dr Ghosh in favour of Mr Miller in an amount of $10,000 (proceedings 2014/333115). On 4 September 2015, the Supreme Court made an instalment payment order.2 September 2015: Mr Miller applies to be substituted as petitioning creditor On 2 September 2015, Mr Miller filed an application to be substituted for Baycorp as the petitioning creditor under s 49 of the Bankruptcy Act. The supporting affidavit sworn by Mr Miller relied on the District Court costs order of $7,000 (see [31] above) and the judgment debt (including interest and filing fees) recorded the next day in an amount of $7,089.26 (case number 2014/275183). On 18 September 2015, Baycorp’s creditor’s petition and accompanying documents were served on Dr Ghosh. 18 November 2015: Dr Ghosh files grounds of notice of opposition to Baycorp’s creditor’s petition and Mr Miller’s claimed debts On 18 November 2015, Dr Ghosh filed grounds of opposition which responded to Baycorp’s creditor’s petition and Mr Miller’s claimed debts. Relevantly, the grounds of opposition said (as written):9.The Supreme Court granted an Order to pay Mr Rodney Miller’s costs by instalment on 4 September 2015, which give an automatic STAY10.I have been granted Costs Orders against Mr Rodney Miller on 16 September 2014 by Judge Olsson of the Sydney District Court which predate and exceed the value of his costs orders against me, and which he has NOT paid me to date23 November 2015: quantification of costs order in favour of Dr Ghosh On 23 November 2015, Balla DCJ ordered that the costs order made against Mr Miller in favour of Dr Ghosh on 16 September 2014 (see [30] above) be quantified as $3,300 and that Dr Ghosh pay Mr Miller’s costs of that motion.17 December 2015: Hearing of Baycorp’s creditor’s petition Baycorp’s petition was heard on 17 December 2015. Judgment was reserved.29 January 2016: Baycorp’s debt paid out On 29 January 2016, the primary judge made an order under s 52(5) of the Bankruptcy Act extending the period at the expiration of which Baycorp’s creditor’s petition would lapse to 24 months after 2 February 2015. He also ordered that Dr Ghosh pay Baycorp $11,265.01. That payment was made.13 April 2016: Mr Miller’s amended creditor’s petition (claiming $7,000) served An affidavit of Mr Anthony Maher, Mr Miller’s solicitor, sworn on 18 April 2016 attests to the service on Dr Ghosh of an amended creditor’s petition dated 13 April 2016 which relies on the District Court costs order of $7,000.14 April 2016: proceedings for leave to appeal Local Court judgments dismissed
Ratio Decidendi
Legal Principle Established
Mr Miller’s notice of contention claims that the decision of the primary judge should be affirmed on the ground that the primary judge should have found that Dr Ghosh did not have any set-off against the judgment debt for $7,000 entered in the District Court of New South Wales on 17 September 2014, upon which Mr Miller relied in his amended creditor’s petition and further amended creditor’s petition.Preparation for hearing of the appeal The preparation for this appeal was somewhat fraught. In part that derives from the fact that the parties have been involved in litigation in the Local Court, the District Court, the Supreme Court, the Federal Circuit Court as well as this Court. Further, Dr Ghosh appears to have had legal representation intermittently. Although it appears that Dr Ghosh had legal advice at some points during the proceedings in the Federal Circuit Court (she referred to her barrister, Mr Soon, in submissions recorded by the primary judge in his reasons), she appeared in person at the hearings on 17 May and 20 July 2016. Dr Ghosh was legally represented at the hearing of the application to stay the sequestration order, she changed representation after that and she was not legally represented at some case management hearings in preparation for the appeal. Her solicitor has changed more than once since the sequestration order was made and different barristers appeared for her on the stay application and on the appeal. In preparation for the appeal, Dr Ghosh indicated a desire to put before the Court transcript of all of the proceedings before the primary judge; however, she said that she considered that it was too expensive to obtain it from Auscript. She sought to tender a transcription which she had caused to be made of recordings of proceedings before the primary judge. I put in place a process for both parties to identify any part of the recorded materials on which they sought to rely and to agree a transcript which they accept accurately reflects those parts of the recording. The parties ultimately did not avail themselves of that facility. There was substantial difficulty in obtaining agreement concerning the materials which should appear in the appeal book. Parts A and B were ultimately compiled with the assistance of a Registrar. There was also dispute as to whether some documents had been supplied by Mr Miller’s lawyers to Dr Ghosh’s then lawyers as she requested. Ms Nolan, counsel for Dr Ghosh, was briefed to appear not long before the hearing. Ms Nolan and Mr Maconachie, counsel for Mr Miller, worked co-operatively to bring before the Court necessary materials on the basis of which the appeal could be conducted. The parties agreed that, in addition to Part C which had been compiled by Dr Ghosh, the material in Parts D and E of the appeal book should be before the Court. These Parts contain affidavits which were tendered in evidence in connection with the application to stay the sequestration order (therefore not before the primary judge) and materials supporting a chronology of the litigation which was prepared by Mr Miller’s legal advisors. Ms Nolan had no instructions to endorse the chronology but in response to a direct query from the Court, she said that she was unable to identify any error in it.