Howard, Harkin and Kelly Trading as Owen Hodge Lawyers v Faltas

[2020] FCCA 185

FEDERAL CIRCUIT COURT OF AUSTRALIA

HOWARD, HARKIN & KELLY TRADING AS OWEN HODGE LAWYERS v FALTAS [2020] FCCA 185

Catchwords:
BANKRUPTCY – Application for a sequestration order under s.27 of the Bankruptcy Act 1966 (Cth) – whether a sequestration order should be made – no sufficient cause for why a sequestration order ought not to be made – sequestration order made.

Legislation:

Bankruptcy Act 1966 (Cth), ss.27, 43, 52

Applicant: ROLF DAVID SUDBURY HOWARD, ROGER MICHAEL HARKIN & JAMES DAVID KELLY TRADING AS OWEN HODGE LAWYERS

Respondent: BIANCA FALTAS

File Number: SYG 330 of 2019

Judgment of: Judge Street

Hearing date: 3 February 2020

Date of Last Submission: 3 February 2020

Delivered at: Sydney

Delivered on: 3 February 2020

REPRESENTATION

Counsel for the Applicant: Mr J Johnson

Solicitors for the Applicant: Owen Hodge Lawyers

Counsel for the Supporting Creditor: Mr P Dodson

Solicitors for the Supporting Creditor: Recoveries & Reconstruction Legal

Solicitors for the Respondent:

Mr P Beazley

Beazley Lawyers

ORDERS

1. A sequestration order is made against the estate of Bianca Faltas.

2. The Petitioning Creditor’s costs be paid out of the bankrupt estate in an amount to be agreed and/or taxed in accordance with the priority to which it is entitled.

THE COURT NOTES THAT:

1. The act of bankruptcy occurred on 13 February 2019.

DATE OF ORDER: 3 February 2020

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 330 of 2019

ROLF DAVID SUDBURY HOWARD, ROGER MICHAEL HARKIN & JAMES DAVID KELLY TRADING AS OWEN HODGE LAWYERS

Applicant

And

BIANCA FALTAS

Respondent

REASONS FOR JUDGMENT

1. This is an application for a sequestration order within the Court’s jurisdiction under s.27 of the Bankruptcy Act1966 (Cth) (“the Act”). 

2. The proceedings were commenced on 15 February 2019. The proceedings became part heard on 18 July 2019. On that occasion, the petitioning creditor read affidavits establishing the service of the bankruptcy notice, verification of the creditor’s petition, service of the creditor’s petition and updated affidavits of search and debt. 

3. A notice of objection was lodged on behalf of the respondent. That objection took issue with the service of the bankruptcy notice, which was in accordance with the rules. That objection also asserted that the proceedings had been brought prematurely, which they had not. 

4. The Court finds that the act of bankruptcy occurred on 13 February 2019. 

5. On 18 July 2019, this Court conducted what was, in substance, the full hearing. The Court indicated that it thought there was little substance in the respondent’s grounds of opposition, which also sought to invite the Court to go behind the judgment obtained in the Supreme Court of New South Wales. No proper basis was identified by the respondent for going behind that judgment.

6. The respondent alleged that she was solvent and proposed to pay out the petitioning creditor in full with costs. It was on that basis that the Court granted an adjournment.

7. The matter came before the Court again on 28 November 2019. On this occasion, affidavits had been filed by the respondent, identifying steps alleged to be taken to try to obtain funds to pay out the subject matter of the bankruptcy notice as well as the supporting creditor, who has also appeared again today. The supporting creditor’s debt is not significant, and is in the order of $15,000.00. The petitioning creditor’s debt is in excess of $50,000.00. The matter was stood over to 3 February 2020. 

8. Mr Beazley, solicitor on behalf of the respondent, relied upon an affidavit that was filed by the respondent on 15 August 2019 that identifies that the applicant is the registered proprietor of two properties. One of those properties is significantly encumbered. Mr Beazley sought to advance the argument that other sufficient cause should be found why a sequestration order ought not to be made in circumstances where, effectively, the petitioning creditor could seek to take proceedings under pt.8 div 2 of the Civil Procedure Act2005 (NSW) for enforcement by writ against real property.

9. There was no submission advanced by Mr Beazley that the respondent, in fact, was solvent, within s.52(2)(a) of the Act. 

10. No evidence was put on by the respondent to prove solvency.

11. The Court is satisfied on the evidence before it that the act of bankruptcy was committed whilst the respondent was within the jurisdiction within the requirements of s.43 of the Act. 

12. The Court is further satisfied that the petitioning creditor has established proof of the matters required under s.52 of the Act. The Court is also satisfied that the petitioning creditor has otherwise complied with the Court rules, provided an updated affidavit of debt, and that there has been tendered into evidence a search identifying that the applicant is not currently the subject of any other sequestration order. 

13. These are proceedings in respect of which the respondent was given a very substantial period of time, since 18 July 2019, to take steps in accordance with what the Court was informed was her intention to pay out a judgment debt. The history of the matter is one in respect of which it is apparent that there is an obstinacy by the respondent in wishing to comply with her obligations to pay her creditor. In circumstances where the Court has provided a significant indulgence in terms of adjourning a matter part heard for such a substantial period, the Court can see no reason why the petitioning creditor, having established that matters required under ss.43 and 52(1) of the Act, is not entitled to a sequestration order. The circumstances identified by Mr Beazley fall well short of other sufficient cause why a sequestration order ought not to be made.

14. Mr Beazley submitted that the bankruptcy proceedings should not be used as a means of debt recovery. These proceedings have not been used as means of debt recovery. On the face of the proceedings, the respondent has been insolvent for a substantial period of time and has had ample opportunity to take steps, if she was able to do so, to arrange her affairs to pay out her supporting creditor and the petitioning creditor.

15. The want of proper evidence in relation to steps taken by the respondent pursuant to what the Court was informed was her intention to pay out the judgement debt, is, of itself, an independent basis upon which the Court would find that other sufficient cause has not been made out. In circumstances where this matter was adjourned on 18 July 2019 specifically to facilitate a potential discharge of the judgment debt, the want of evidence in relation to those steps is reason by which the Court further draws the inference in respect of the applicant being unable to pay debts as or when they fall due and finds that other sufficient cause why a sequestration order ought not to be made, has not been made out. 

16. Accordingly, in these circumstances, the Court is satisfied that a sequestration order should be made under s.52 of the Act.

I certify that the preceding sixteen (16) paragraphs are a true copy of the transcript of the published oral reasons for judgement of Judge Street delivered in open Court on 3 February 2020 and the parties were provided sealed copies of the Court’s orders

Associate: 

Date:  11 March 2020