Hashmi v AKTER
[2013] FCCA 728
•26 June 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HASHMI v AKTER | [2013] FCCA 728 |
| Catchwords: BANKRUPTCY – Sequestration order – application for annulment – where bankruptcy notice issued in relation to judgment debt from default judgment – where act of bankruptcy failure to comply with bankruptcy notice – where default judgment under review at time sequestration order made – where debtor’s solicitors made aware of petition but not present when sequestration order made – where Registrar aware of proceedings to set aside default judgment – whether all true facts known when sequestration order made – whether to annul sequestration order – application for review of sequestration order – where default judgment set aside – where no evidence of proposed defence – where R.7.06(2) and R.7.06(3) of the Federal Circuit Court (Bankruptcy) Rules 2006 not complied with – where debtor’s understanding of English and legal system limited – whether to forgive non-compliance – whether to set aside sequestration order. |
| Legislation: Bankruptcy Act 1966 (Cth) ss.52, 153A, 153B Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) r.7.06 |
| Re Raymond; Ex parte Raymond (1992) 36 FCR 424 Rigg v Baker (2006) 236 ALR 629 Martin v Commonwealth Bank of Australia (2001) 217 ALR 634 |
| Applicant: | ABDUL MATIN HASHMI |
| Respondent: | SANJIDA AKTER |
| File Number: | CAG 26 of 2013 |
| Judgment of: | Judge Raphael |
| Hearing date: | 26 June 2013 |
| Date of Last Submission: | 26 June 2013 |
| Delivered at: | Canberra |
| Delivered on: | 26 June 2013 |
REPRESENTATION
| Solicitors for the Applicant: | J. S. O’Connor Harris and Co. |
| Solicitors for the Respondent: | Nicholl & Co |
ORDERS
Orders 1, 2 and 4 of Registrar Wall made on 6 June 2013 be set aside.
The petition remain on foot.
Applicant debtor to pay the respondent creditor’s costs of the application assessed in the sum of $3,000.00, such costs to be paid within 21 days.
Costs of the petition and hearing on 6 June be reserved.
Compliance with Rule 7.06 of the Federal Circuit Court (Bankruptcy) Rules 2006 by the applicant be waived.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT CANBERRA |
CAG 26 of 2013
| ABDUL MATIN HASHMI |
Applicant
And
| SANJIDA AKTER |
Respondent
REASONS FOR JUDGMENT
On 6 June 2013 Registrar Wall made a sequestration order against the estate of Abdul Matin Hashmi. He also ordered that any proceedings under that order be stayed pursuant to s.52(3) of the Bankruptcy Act 1966 (Cth)[1] until 21 June 2013. That stay was later extended until today. Mr Hashmi, the bankrupt, has now made an application before this court seeking annulment of the bankruptcy or, alternatively, that the decision of Registrar Wall be reviewed. In support of that application he has filed an affidavit by Mr Mark Gerald Popperwell, a solicitor.
[1] The “Act”.
The application is resisted by the petitioning creditor and on her behalf an affidavit has been filed by Ms Teresa Dowling, also a solicitor. There were no objections to anything contained in these affidavits, and from them I am able to reconstruct the events in the dispute between the parties. However, one essential element of those events remains opaque, and that is the basis of the creditor’s claim against the debtor and the basis of the debtor’s alleged defence. Neither party thought it was important for the court to know any of these facts, an attitude that I find somewhat surprising.
On 22 October 2012 the creditor commenced Magistrates Court proceedings against the debtor. Those proceedings were served and on 11 December 2012 a default judgment was given. Notice of the default judgment was served on 18 December 2012, but the debtor did nothing in regard to it. On 10 April 2013 a bankruptcy notice which had been issued by the Official Trustee on 21 December 2012 was served on the debtor. He did not respond to the bankruptcy notice and he committed an act of bankruptcy by not making the payment demanded therein. The act of bankruptcy was dated 1 May 2013.
At this stage the debtor began to stir himself. On 10 May 2013 an application to set aside the default judgment was served upon the creditor. The hearing of that application was listed for some four days later and because of the short time space the parties agreed to an adjournment of two weeks. However, during that time the creditor was hospitalised and it became impossible for her lawyers to obtain instructions from her. As a result a further adjournment of the set aside application was agreed to. The set aside proceedings were set down for 11 June 2013.
On 24 May 2013 the creditor was discharged from hospital and gave instructions for her lawyers to continue with the proceedings on the creditor’s petition which had been presented on 15 May 2013. Her solicitors contacted the debtor’s solicitors or, more accurately, attempted to contact them to obtain information as to whether or not they were going to appear for the debtor, the contact being by way of email on 5 June 2013 and a telephone call on 6 June 2013, the morning of the hearing. When the matter was heard before Registrar Wall he was advised of the existence of the application to set aside the default judgment. He was not provided with any information concerning that application and was in the same position as myself with regard to it. Based on this lack of information and the absence of the debtor he made the sequestration order on 18 June 2013 at a hearing which was attended by both parties and their lawyers the default judgment was set aside and the debtor was ordered to file a defence within 21 days.
An annulment of a bankruptcy by the court can be obtained either under s.153A where the debtor has paid his debts in full or under s.153B which is in the following form:
“(1) If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.
(2) In the case of a debtor's petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented.”
An example of when a sequestration order ought not to have been made might be because the bankrupt establishes that he was solvent at the time of the hearing; or perhaps because, mistakenly, an order was made in respect of an act of bankruptcy where the debt was under the statutory minimum of $5,000.00; or, as occurred in Re Raymond; Ex parte Raymond (1992) 36 FCR 424, where a court is satisfied that the judgment should never have been entered against the debtor; in that case because the agreement under which the creditor sued was an agreement between the creditor and a company and not the debtor at all.
In coming to a decision as to whether or not a sequestration ought to have been made, the plurality of the Full Court in Rigg v Baker (2006) 236 ALR 629[2], per Spender and French JJ, said, under the heading, “General principles”, at [61]:
“In determining whether a sequestration order ought to have been made the court may consider “not only the case as disclosed at the time the order was made, but as it would have been disclosed had all the true facts been before the court on the making of the order”: Re Cook (1946) 13 ABC 245 at 259 per Clyne J; Re Williams [1969] ALR 179 at 181; (1968) 13 FLR 10 at 23 per Gibbs J. But facts which have come into existence since the making of the order are not relevant to the question whether it ought to have been made: Re Scott (1975) 6 ALR 558 at 559.”
[2] “Rigg”.
At the time the order in this case was made the true facts were known to the Registrar. Namely, a default judgment had been obtained because the debtor had not responded, a bankruptcy notice had been served and an act of bankruptcy had taken place by virtue of the debtor’s noncompliance with it. The debtor had not made any application to set aside the bankruptcy notice, and at the time the act of bankruptcy was committed had not taken any steps to set aside the primary judgment. The Registrar knew that a bankruptcy petition had been presented and that a lawyer in a firm of solicitors that had been acting for the bankrupt had been made aware of the existence of the petition. He also knew that the debtor had made an application to set aside the original judgment debt, but that application had not yet been heard. At the time he made the sequestration order, the Registrar was entitled to make that order based upon the act of bankruptcy and the non-appearance of the debtor at the hearing. I do not believe there are any circumstances in which it could be properly said that the sequestration order ought not to have been made. Although, I accept that had the setting aside order been made before the hearing the court’s discretion may well have been evoked; see Rigg at [64]. However, the debtor’s non-attendance at the hearing might have told against him; Rigg at [71]. For these reasons, I would dismiss the first ground of application.
The second ground of application is for a review of the Registrar’s decision, and that poses different criteria. A court sitting in review of a Registrar’s decision is sitting in a hearing de novo, Martin v Commonwealth Bank of Australia (2001) 217 ALR 634, and so it must deal with the facts as they are on the day of that hearing, and not the facts as they were on the day of the hearing before the Registrar. Today I am aware that the default judgment has been set aside, and I am faced with an application for a sequestration order in respect of which the judgment underlying the bankruptcy notice – and hence the act of bankruptcy – is no longer in existence. A court considering those facts would be hesitant in making a sequestration order – particularly when the parties are represented, as they are here. The court would take into account the conduct of the debtor and be concerned at what one might consider to be a last gasp attempt to avoid the inevitable. But it would note that another court, to which it would apply the doctrine of comity, has determined that the default judgment should be set aside. And I think, in ordinary circumstances, would decline to make a sequestration order, although it would not set aside the petition.
The general order made in these circumstances is that the application for the sequestration order, or the hearing of the petition, be adjourned until the outcome of the principal debt claim be determined. This is not a hard and fast rule. It would certainly not necessarily apply where there are other creditors known, particularly if other creditors have appeared. That brings me to an additional problem with which this court is now faced. The Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) require that when an application such as this is made, all known creditors of the applicant debtor are to be notified so they can appear and put to the court their reasons for maintaining the sequestration order: R.7.06(3). The applicant did not do this. The applicant’s solicitor tells me he has no knowledge of the applicant’s other debts. The application must also be served on any trustee appointed: R.7.06(2). In this case, I would be prepared to forgive a failure so to act, because of the stay that has occurred, in respect of which I will assume that the trustee has done nothing to acquaint himself with the bankrupt’s position.
The question is whether the court should forgive the former non-compliance or whether it should consider it in the context of the debtor’s previous inaction. In deciding to forgive the non-compliance I have taken into account the only thing that I really know about the debtor and that is what is contained in the affidavit of Mr Popperwell at [14] which appears to confirm what was told to me at the bar table, that the debtor is a man with a very limited knowledge of English and a very limited understanding of the legal system.
He should not be blamed for the failure of his lawyers to act in accordance with the Rules but, in my view, this disregard of those Rules should be condemned in costs. The orders the court will make are: Orders 1, 2 and 4 of Registrar Wall made on 6 June 2013 be set aside; the petition remain on foot; applicant debtor to pay the respondent creditor’s costs of the application assessed in the sum of $3,000.00, such costs to be paid within 21 days; the costs of the petition and hearing on 6 June be reserved; compliance with Rule 7.06 of the Federal Circuit Court (Bankruptcy) Rules by the applicant be waived.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Judge Raphael
Associate:
Date: 4 July 2013
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