Gray v The Owners Corporation Strata Plan 61619
[2008] FMCA 678
•22 May 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GRAY v THE OWNERS CORPORATION STRATA PLAN 61619 | [2008] FMCA 678 |
| BANKRUPTCY – PRACTICE & PROCEDURE – Evidence via telephone – discretionary factors to be considered – application refused due to requirement of witness to be cross-examined on documents on the court file. BANKRUPTCY – Review of Registrar’s sequestration order – adjournment due to unavailability of applicant – conditions requiring applicant to return to Australia and cooperate with trustee in bankruptcy. |
| Bankruptcy Act 1966 (Cth) Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.2.03, 7.06 |
| Goodall v Nationwide News Pty Limited [2007] FMCA 218 |
| Applicant: | ROSEMARY ANNE GRAY |
| Respondent: | THE OWNERS CORPORATION STRATA PLAN 61619 |
| File Number: | SYG 2245 of 2007 |
| Judgment of: | Smith FM |
| Hearing date: | 22 May 2008 |
| Delivered at: | Sydney |
| Delivered on: | 22 May 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr P Barham |
| Counsel for the Respondent: | Mr D Radman |
| Solicitors for the Respondent: | Grace Lawyers |
| Counsel for the Trustee: | Mr A Spencer |
| Solicitors for the Trustee: | Bartier Perry |
ORDERS
The hearing of the application is adjourned to 25 June 2008 at 10.15 (and if necessary on 27 June 2008), upon the conditions:
(i)that the applicant file and serve a notice of her address for service in Australia before 4pm on 26 May 2008.
(ii) that the applicant must return to Australia and surrender her passport to her trustee in bankruptcy no later than 4 pm on 10 June 2008, and thereafter comply with his reasonable instructions in relation to the administration of her bankrupt estate.
In the event that the applicant fails to comply with these condition in any respect, the respondent and trustee have liberty to apply for the immediate dismissal of the application upon 24 hours notice to the applicant.
The applicant must pay the costs of the respondent and trustee in relation to the adjournment as agreed or taxed pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth). In the event that the application is dismissed, the costs of the respondent are to be paid from the estate of the applicant bankrupt in the priority fixed by s.109(1)(a) of the Bankruptcy Act 1966 (Cth).
The applicant must file and serve any additional affidavits no later than 4 pm on 29 May 2008. No further evidence in chief will be admitted, without the leave of the court.
The respondent and trustee must file and serve any evidence in reply no later than 4pm on 11 June.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2245 of 2007
| ROSEMARY ANNE GRAY |
Applicant
And
| THE OWNERS CORPORATION STRATA PLAN 61619 |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
The applicant, Ms Gray, applies to the Court for review of an order made by Registrar Tesoriero on 13 February 2008, making a sequestration order against her under the Bankruptcy Act 1966 (Cth) and appointing Mr Pascoe as trustee of her bankrupt estate.
The sequestration order was made in her absence, but she had appeared at the previous listing before Registrar Segal on 23 January 2008, and there is some evidence that she was aware of the adjourned date. However, she disputes that she was aware that she would need to attend to dispute the making of a sequestration order on that day.
She also challenges the debt relied upon in the petition, which was the sum of $7,092.39 for non payment of strata levies in relation to a property at 564/6 Cowper Wharf Road Woolloomooloo, Sydney between June 2004 and May 2005 plus interest. She contends that only a lesser amount was owing by her at the time of the service of the bankruptcy notice on 8 June 2007, at the time of the sequestration order, and currently. In this respect she contends that an agreement was arrived at between her former husband and the body corporate, which had the effect of reducing her liability under the judgment debt against both of them.
She also disputes whether she was properly served with the bankruptcy notice by reason of it being left with the security officer of the property. There is evidence that the home unit had been part of the matrimonial property, and that she has been using it as an address for service.
She also has a claim, although its relevance to the opposition of the sequestration order is unclear, that there were aspects of the proceedings in relation to her bankruptcy which were an abuse of the processes of the Court. The evidentiary basis of these claims is obscure at this time.
Her application for review of the sequestration order was filed one or two days after the time required under Bankruptcy Rule 2.03(1). However, there are circumstances which appear to point towards a favourable exercise of the discretion to extend that time, although I have not arrived at a final view about this. The application for review was lodged by her, acting in person. She subsequently employed a solicitor, who is now off the record, and she now has engaged counsel to present her case to the Court.
Some of the contentions raised by Ms Gray do not have clear merit on the evidence as it stands at present, even looked at provisionally. However, I am not prepared to find that she has no arguments of merit to establish that a sequestration order ought not have been made, or that it ought not now be made on review of the Registrar's order.
The application to set aside was returnable on 15th April 2008. On that day, without any further adjournments, it was referred to me for directions to fix a hearing date. I made orders giving the applicant opportunity to amend her application and file affidavits, and also for a report by the trustee under r.7.06(6). The matter was clearly set down for hearing today.
It appears that everybody expected Ms Gray to be available to attend today to be cross-examined on her affidavits which she has filed in support of her various grounds. However, a few days ago she informed her counsel that she was unable to attend because she was absent from Australia. He tells me from the Bar table that she has told him she is working in Sulawesi in Indonesia, and is unable to return to Australia until 8 June. No evidence to this effect has been presented to the Court.
There is evidence before the Court in the report of the trustee that she spoke to one of his officers on 19 March 2008. After discussing with him the possibility of a consensual annulment of the bankruptcy, she said: “If an agreement could not be reached today I will be leaving for the airport and you won't hear from me again”. The trustee subsequently discovered that she was seeking to leave the country in a private aircraft without his permission. However, he later consented to her travelling for a period not exceeding 14 days ending on 19 May. It was at around that date that Ms Gray indicated to her counsel that she, in fact, would not be returning to attend the hearing today.
An application was made informally to the Court for her evidence to be taken by telephone, and that application was made orally by her counsel today at the beginning of the hearing. I refused the application. It is clear to me from reading the material that the issues raised by Ms Gray require her personal attendance, so that she can be cross-examined on documents, including some documents on the Court file itself, in relation to many of the factual issues which she raises. It is clear to me that her general credibility might be a matter which I will need to assess, and in the circumstances of this case I do not consider it would be possible to do that without seeing her in person in the witness box. In this respect I refer to the discussion of authorities about the Court's power to take evidence by audio or video link given by Lucev FM in Goodall v Nationwide News Pty Limited [2007] FMCA 218.
Upon the refusal of that application, Ms Gray’s counsel applied for an adjournment of the hearing until after 8 June, when the applicant could return to Australia to be present. Argument about the adjournment application has occupied most of the morning, and it is difficult to see that the hearing would be able to be finished today if it proceeds, even in her absence. It is not possible for the hearing to continue into tomorrow or next week.
The application for adjournment is put on the basis that, notwithstanding the absence of the evidence properly presented in support, the Court should feel moved by compassionate considerations in relation to the background of the matter. This suggests that Ms Gray has become embroiled in matrimonial litigation over many years. Over this time, the strata levies for the Wolloomooloo property were not paid by either of the parties to the marriage, and they appear to have thought that this could be deferred until the finalisation of the matrimonial accounting. It is not clear to me that she had any good basis for that belief, but this is a matter I may have to assess further, and I have not arrived at a clear view about that. She now claims that her former husband later arrived at an agreement with the body corporate, on her behalf, to reduce her liability.
It is also submitted that I should view the adjournment application compassionately because of the seriousness of the effects of bankruptcy and, in particular, the applicant's liability to what appears to be the rapidly escalating expenses of the litigation and of the trustee’s administration.
In the trustee's report to the Court, he estimates costs, fees and charges at $101,946 including the petitioner's costs on the petition, but possibly not including the costs of today and the costs of the continuance of the litigation. His report explains why abnormal levels of costs have been incurred, and I would not, at this stage, form any judgment that any costs have been improperly or unreasonably incurred. That may or may not be an issue for me to address in the course of this application.
It is clear that Ms Gray has not cooperated with him fully in the manner required by the Bankruptcy Act, including in relation to her travel overseas. Her statement of affairs appears, prima facie, to have been inadequate, and the trustee has been forced to investigate undisclosed property and pending family law proceedings, and also to take responsibility in relation to a sale of the Woolloomoolo property. This has been placed on the market pursuant to Family Court orders, and will have to be sold both for the purposes of the bankruptcy and the matrimonial accounting.
His report provides an opinion that Ms Gray was insolvent at the date of the bankruptcy and remains insolvent at present. He has identified creditors with claims in the region of $183,283 and possibly assets coming into the estate at an indefinite time in the future, in particular by way of an inheritance, which may give rise to a surplus of $662,507. The trustee indicates that there are many areas where he needs to take decisions in relation to the administration of this estate if, indeed, his tenure as trustee is made certain by the outcome of the present application.
The trustee’s counsel today opposed an adjournment, on the ground that the uncertainty raised by the application was detrimental to the proper administration of the bankrupt estate, and that the Court should be concerned about the possibility that the applicant is deliberately avoiding her return to Australia and her obligations to cooperate with the trustee.
These are powerful arguments against allowing an adjournment. However, it is not clear to me that there is any particular difficulty faced by the trustee in an adjournment of some four to six weeks in the hearing, as is sought. It is possible that granting an adjournment might encourage Ms Gray to return and to meet her obligations.
Given the trustee's opinions about a possible surplus, there would also not appear to me to be a major impediment to an adjournment arising from the difficulty of meeting costs orders in the litigation, although of course Ms Gray is, and should be, very concerned about the expense of this litigation.
The respondent petitioner also opposed an adjournment on the grounds of lack of merit in the application to set aside, the uncertainty about the applicant's absence from Australia, and the costs arising from an adjournment. I have given the creditors submissions careful consideration also.
On balance, however, I consider that the interests of justice require that Ms Gray should be given a full opportunity to present her application to the Court, including by appearing before the Court in person.
I am not persuaded that the administration of her estate in bankruptcy would be harmed, rather than assisted, by her being permitted to put forward all her arguments in contest to the making of the sequestration order at this stage. It seems to me that if she does not do so now, she and the trustee and creditors will face uncertainties in the future in relation to all the contentions raised in this application. She would be able to do this in the course of annulment applications. I think she should be given the opportunity to present them in her present application.
Taking into account all the circumstances shown in the evidence before me, I therefore propose to adjourn the hearing of this application, but on conditions which I shall settle with the representatives of the parties. These will include an order allowing the application to be dismissed summarily, if she does not return to Australia, surrender her passport to the trustee, and comply with his reasonable requests in relation to the administration of the estate. As is accepted by her counsel, she must also pay costs arising from the adjournment.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Michael Abood
Date: 27 May 2008
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