Idameneo (No. 123) Pty Ltd v Hanna
[2012] FMCA 805
•6 September 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| IDAMENEO (NO. 123) PTY LTD v HANNA | [2012] FMCA 805 |
| BANKRUPTCY – Creditor’s petition – notice stating grounds of opposition to petition – pleaded grounds unable to be sustained – petition should proceed and sequestration order should be made. |
| Bankruptcy Act 1966, ss.40, 42 43, 44, 52 Bankruptcy Regulations 1996 (Cth) reg.16.01 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) rr.4.04, 4.05, 4.06 |
| Adams v Lambert [2006] HCA 10 |
| Applicant: | IDAMENEO (NO.123) PTY LTD |
| Respondent: | NADI KYROLLOS HANNA |
| File Number: | SYG 1516 of 2012 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 27 August 2012 |
| Date of Last Submission: | 27 August 2012 |
| Delivered at: | Sydney |
| Delivered on: | 6 September 2012 |
REPRESENTATION
| Solicitor for the Applicant: | J. Atkinson |
| The Respondent: | The Respondent appeared in person |
ORDERS
(1) The Notice Stating Grounds of Opposition to the Petition filed by Nadi Kyrollos Hanna on 16 August 2012 be dismissed.
(2) A sequestration order be made against the estate of Nadi Kyrollos Hanna.
(3) The applicant’s costs, including any reserved costs be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
(4) A copy of the sequestration order be given to the Official Receiver in Sydney within 2 working days.
THE COURT NOTES THAT:
(5) The date of the act of bankruptcy is 21 June 2012.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1516 of 2012
| IDAMENEO (NO. 123) PTY LTD |
Applicant
And
| NADI KYROLLOS HANNA |
Respondent
REASONS FOR JUDGMENT
Introduction
On 12 July 2012 the applicant creditor, Idameneo (No. 123) Pty Ltd ACN 002 968 185 (“Idameneo”), filed a Creditor’s Petition against the respondent debtor, Nadi Kyrollos Hanna, in this court, pursuant to a costs order and certificate of taxation in the Federal Court of Australia in favour of Idameneo in the amount of $165,023.15. This matter was first listed before a Registrar of the Court on 16 August 2012 where it was adjourned to 27 August 2012. On 16 August 2012 the applicant filed a Notice Stating Grounds of Opposition to the Petition, supported by affidavit. The Registrar, before whom the matter came on 27 August 2012, referred the matter to this Court to be heard on the same day.
Evidence
Idameneo sought to rely on the following evidence at the hearing of the petition:
a)Affidavit of Thomas Bateman sworn 9 July 2012 (as Part 2 of the Creditor’s Petition) (Sub-paragraph 5(c) was not read);
b)Affidavit of James Atkinson affirmed 11 July 2012;
c)Affidavit of James Atkinson affirmed 24 August 2012;
d)Affidavit of Malcolm Hill sworn 1 August 2012; and
e)Affidavit of Timothy Brewer affirmed 27 August 2012.
The respondent sought to rely on his own affidavit affirmed on 16 August 2012.
Notice Stating Grounds of Opposition to Petition
The respondent’s Notice Stating Grounds of Opposition to Petition states the following grounds:
1. Out of time of applicant.
2. Wrong jurisdiction – started in Supreme Court.
3. Vindictive nature of applicant, unwilling to negotiate. Wants to make [respondent] example to its other contractors.
The respondent’s affidavit in support states:
1. That the applicant was unwilling to negotiate settlement.
2. The applicant wants to make me an example to deter other contractors. Vindictive nature.
Formal Requirements for Issuance of a Sequestration Order
The Court may make a sequestration order upon proof of the matters set out in s.52(1) of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”), and subject to the jurisdiction to making sequestration orders under s.43 of the Bankruptcy Act and the conditions on which the creditor may petition under s.44 of the Bankruptcy Act being met.
Section 52(1) of the Bankruptcy Act provides as follows:
(1)At the hearing of a creditor’s petition, the Court shall require proof of:
(a) The matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient),
(b) service of the petition; verified by an affidavit of service,
(c) the fact that the debt or debts on which the petitioning creditor relies or is still owing;
And, if it is satisfied with the proof of these matters, may make a sequestration order against the estate of the debtor.
Section 43 of the Bankruptcy Act provides that the Court may make a sequestration order when:
(a)A debtor has committed an act of bankruptcy (Bankruptcy Act s.43(1)(a); and
(b)Relevantly, at the time when the act of bankruptcy was committed, the debtor was personally present and an ordinarily resident in Australia (Bankruptcy Act s.43(1)(b)(i).
Section 44 of the Bankruptcy Act provides that the creditor’s petition is not to be presented, unless:
(a) The debt is more that $5,000;
(b)The debt is a liquidated sum due at law and payable immediately (Bankruptcy Act s.44(1)(b); and
(c)The act of bankruptcy in which the petition is founded was committed within 6 months before the presentation of the petition (Bankruptcy Act s.44(1)(c).
The applicant creditor is also obliged by the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) (“the FMC (Bankruptcy) Rules”) to put before the Court affidavits:
a)Verifying the petition (Bankruptcy Act s.47(1), FMC (Bankruptcy) Rules r.4.02);
b)As to search of records of the Court and of the Federal Court as to any application in relation to the Bankruptcy Notice (FMC (Bankruptcy) Rules rr.4.04(1)(a) and 4.04(2));
c)Of service of the Bankruptcy Notice (FMC (Bankruptcy) Rules r4.04(1)(b));
d)Of service of the documents required to be served under the FMC (Bankruptcy) Rules r.4.05 (FMC (Bankruptcy) Rules r.4.06(2));
e)A search of the National Personal Insolvency Index no earlier that the day before the hearing date of the petition (FMC (Bankruptcy) Rules r.4.06(4)); and
f)Of debt which the creditor still relies as owing (FMC (Bankruptcy) Rules r.4.06(4)).
Some of the requirements under the FMC (Bankruptcy) Rules overlap with those under the Bankruptcy Act.
In relation to the matters requiring formal proof the Court finds as follows:
a)The matters stated in the petition are supported by the:
i)Affidavit of James Atkinson sworn 11 July 2012 accompanying the petition (Bankruptcy Act ss.47 and 52(1)(a), FMC (Bankruptcy) Rules r.4.02). The petition was served on the respondent on 31 May 2012 at 1:42 pm;
ii)Affidavit of Thomas Carwadine sworn 9 July 2012 attached to the Creditor’s Petition verifying paragraphs 1, 2, 3 and 4 of the Creditor’s Petition;
b)The debt upon which Idameneo relies is still owing (Bankruptcy Act s.52(1)(c));
c)The respondent has committed an act of bankruptcy (Bankruptcy Act s.42(1)(a)) committed on 21 June 2012 pursuant to s.40(1)(g) of the Bankruptcy Act;
d)At the time of the act of bankruptcy was committed was committed the respondent:
i)Was ordinarily present in Australia; and
ii)Ordinarily resided in Australia (Bankruptcy Act s.43(1)(b));
e)The debt owed by the respondent is $165,023.15, being a sum more that $5,000.00 (Bankruptcy Act s.44(1)(a));
f)The debt of $165,023.15 is a liquidated sum, payable immediately (Bankruptcy Act s.44(1)(b));
g)The respondent, Nadi Kyrollos Hanna, failed to comply on or before 21 June 2012 with the requirements of a bankruptcy notice served on him on 31 May 2012;
h)Searches of the records of this Court and the Federal Court have been made and no application has been made in either Court in relation to the Bankruptcy Notice;
i)The Bankruptcy Notice NN 2994 of 2012 was served on the respondent, Nadi Kyrollos Hanna, by leaving it at the respondent’s last-known address pursuant to r.16.01(1)(c) of the Bankruptcy Regulations 1996 (Cth);
j)That at least five days before the date fixed for the hearing of the petition the:
i)Petition (FMC (Bankruptcy) Rules r.4.05(a));
ii)A copy of the affidavit verifying the petition(FMC (Bankruptcy) Rules r.4.05(b));
iii)A copy of the affidavit of search of court records (FMC (Bankruptcy) Rules r.4.05(c)); and
iv)A copy of the affidavit of service of the Bankruptcy Notice (FMC (Bankruptcy) Rules r.4.05(d))
Were served on the respondent personally, Nadi Kyrollos Hanna; Affidavit of Malcolm Hill sworn 1 August 2012;
k)The National Personal Solvency Index was searched on 14 December 2011 (the last business day before the petition was heard) (FMC (Bankruptcy) Rules r.4.06(3)) and that details of references in that index to the respondents are before the Court (FMC (Bankruptcy) Rules r.4.06(3)(a));
l)A copy of the relevant extract of the Index is attached to the affidavit of search of James Atkinson affirmed 24 August 2012 (FMC (Bankruptcy) Rules r.4.06(3)(b)(i)). As the matter was reserved on 27 August 2012 a new affidavit of search will be required to be filed at the next court date;
m)There is an affidavit of final debt of Timothy Brewer affirmed 27 August 2012, being a person with knowledge of the facts sworn the day before the hearing of the petition that the debt on which the applicant creditor relies is still owing (FMC (Bankruptcy) Rules r.4.06(3)(c)). However, as the matter was reserved on 27 August 2012 a new affidavit of final debt will be required to be filed at the next court date.
Hearing on 27 August 2012
The matter was listed before a Registrar of the Court on 27 August 2012, and subsequently referred to this Court. Mr Atkinson appeared on behalf of Idameneo and the respondent debtor, Dr Hanna, appeared in person. The respondent sought to be heard on his Notice Stating Grounds of Opposition to the Petition and Mr Atkinson sought to proceed with the petition.
Dr Hanna submits that the applicant’s Petition was an abuse of process by the applicant and Idameneo has a personal issue with him. The respondent submits that Idameneo is trying to bankrupt him to send a message to other contractors to it to toe the line, and that these proceedings are a vindictive and punitive measure. This exercise seeks to punish the respondent, rather than recover the money. Dr Hanna argues that despite his attempts, Idameneo have had no interest in settling the debt. When the respondent signed the settlement deed (in respect of proceedings that had been commenced in the Supreme Court of NSW and transferred to the Federal Court) with Idameneo he submits that he did not know what the applicant’s costs would be, or that they would even seek to recover them. He contends that the solicitors acting for Idameneo told him that Idameneo would not be seeking their costs in relation to the Federal Court proceedings. His impression was that, if anything, costs associated with these proceedings would be in the vicinity of $20,000. Had he known that at the time, he wouldn’t have paid the original settlement of $175,000. The respondent contends that he has a number of debts, and if he is forced into bankruptcy he won’t be able to continue his work as a skin cancer doctor in the Penrith area, reducing competition for such business.
Mr Atkinson, in reply, submits that the deed of settlement that was entered into by consent by Idameneo and the respondent was drafted by the respondent’ solicitors, as the firm’s name appears at the bottom. He contends that the orders of the Federal Court were for a sum to be paid, as well as costs. The claim, as apart from costs, was settled and the costs went to assessment, of which the respondent took part in. A certificate of assessment was issued on 30 December 2011, after which Idameneo obtained sealed orders and eventually a bankruptcy notice was issued as against the respondent. In respect of the various settlement offers, Mr Atkinson argues that Idameneo seriously considered the offers put forward by the applicant, but all were less than 50 percent of the total of the debt and Idameneo rejected them as being unreasonable. Mr Atkinson also seeks to move on the Creditor’s Petition.
Consideration
Dr Hanna raised two objections in respect to the contents of the Creditor’s Petition in Part 1 – Petition is dated 11 July 2011. In the context of the proceeding clauses in that part the year 2011 is clearly wrong and should read 2012. In those circumstances a correction should be allowed under s.306 of the Bankruptcy Act to correct that date to 2012: Adams v Lambert [2006] HCA 10.
The second objection identified by Dr Hanna in the Petition relates to the information contained in clause 5(c) and (d). Dr Hanna indicated that the business “The Shire Skin Cancer Clinic” is not his business and is not the owner as indicated in the Petition, rather, he is a contractor to that business. Mr Atkinson indicated that the information in s.5 was based on the searched carried out by his organisation and provided to assist the Insolvency Trustee Service Australia (“ITSA”). Mr Atkinson indicated that this was the first time that this issue had been raised since the service of the Petition on Dr Hanna. Mr Atkinson indicated that the application was based on Dr Hanna’s failure to deal with the Bankruptcy Notice within 21 days. Section 5 is a pro forma part of the Petition and merely states that the applicant creditor provides the following information to the extent it is known to the applicant creditor for use by ITSA. I believe that this error can also be corrected under s.306 of the Bankruptcy Act in that s.5(c) is deleted and that 5(d) is to be amended to read “C/O The Shire Skin Cancer Clinic” and to incorporate the address already appearing under 5(d).
When Dr Hanna was asked if there were any other issues he indicated that he was seeking the bankruptcy to be thrown out of Court because it was abuse of process and support of this contention Dr Hanna indicated that Idameneo was a $2 billion company and they had a thousand doctors on contract. The owner of the company has got a personal vendetta against him and is trying to bankrupt him as a message to all the other contractors to comply with their directions and that there was no real interest in the recovery of the money and the company is not open to any negotiations. Dr Hanna maintains it is purely a vindictive and punitive measure to punish him rather than the recovery of the money. Dr Hanna acknowledged that he was served with a Bankruptcy Notice and that he has tried to negotiate with the company to resolve the issue but these attempts to negotiate were rejected.
Dr Hanna’s submissions were that he signed a settlement with Idameneo (from the information disclosed below, this appears to be the settlement of the mediation between the parties ordered by his Honour Graham J). Dr Hanna claims that when this settlement was entered into the other side did not disclose to him the quantum of their costs and the impression that he formed from discussions with their solicitors was that they were not going to pursue the issues of costs so on that basis he signed the agreement and paid Idameneo $175,000. Dr Hanna states that after this was finalised, Idameneo then pursued him for the costs recovery in the amount of $165,023.15 which was in addition to $175,000 paid at settlement of the mediation.
To assist in the understanding of the proceedings in which the mediation and cost orders occurred the affidavit of James William Atkinson affirmed 11 July 2012 contained two annexures which were orders made by his Honour Graham J in proceedings (P)NSD724/2008. Annexure “D” an order made by his Honour on 30 April 2009 in the following form:
BY CONSENT, THE COURT ORDERS THAT:
1. The orders made in this matter by this Honourable Court on 1 December 2008 be vacated and, in lieu thereof, the following orders be made.
2. Without admission, judgement be entered for the applicant in relation to the claims made in the statement of claim on the issue of liability.
3. Damages in relation to the statement of claim be assessed.
4. Without admission, the cross claimant’s cross-claim filed 2 July 2008 be dismissed.
5. The cross-claimant pay the cross-defendant’s costs of the cross-claim, as agreed or assessed.
6. The costs of these proceedings, other than those in relation to the cross claim filed in these proceedings, be reserved.
7. The outstanding issues in the proceedings be referred to mediation by a mediator agreed between the parties. Failing agreement upon an appropriate mediator on or before 4 May 2009 the applicant shall cause the matter to be relisted for further directions forthwith.
8. The mediation referred to in paragraph 7 occur on or before 13 May 2009.
9. The proceedings be listed for Pre-Trial Directions at 9.30am on Thursday 14 May 2009.
10. In the event that the proceedings are not settled prior, the proceedings be listed for Hearing on the issues of quantum and costs to commence at 10.15am on 2 June 2009 with an estimate of three days; however, to proceed upon the basis that the Hearing will continue until it is concluded.
…
In Annexure “C” is an order made by his Honour on 4 June 2009 in the following form:
THE COURT NOTES:
1. That the outstanding issues in the proceedings, namely damages in relation to the Statement of Claim and costs of the proceedings other than the cross-claim, have been settled.
2. The terms of settlement (two pages and a two page annexure), initialled by Graham J, dated this day and placed with the papers.
AND THE COURT ORDERS, BY CONSENT:
3. Judgment for the Applicant against the Respondent for $500,000 (five hundred thousand dollars) (“Judgment”).
4. No interest on the Judgment shall be payable prior to 1 July 2009.
5. Interest shall be payable on the Judgment pursuant to and at the rate stipulated in Order 35 Rule 8 on and from 1 July 2009.
6. In addition to the costs payable by the Respondent to the Applicant pursuant to orders made on 30 April 2009, the Respondent to the Applicant’s cost of the proceedings, as agreed or assessed, including but not limited to:
a) the Applicant’s costs incurred whilst the proceedings were in the Supreme Court of New South Wales (proceedings number 4709 of 2007) (“Supreme Court”)
b) the Applicant’s costs of the application to transfer the proceedings from the Supreme Court into this Court; and
c) the costs incurred by the Applicant in complying with the subpoenas addresses to it and dated 12 May 2009 and 18 May 2009, pursuant to Order 27 Rule 11 of the Federal Court Rules and direct such costs be fixed in accordance with the Court’s usual procedure in relation to costs.
7. The Applicant may set off from the costs the Respondent is liable to pay to the applicant the costs payable by the Applicant to the Respondent pursuant to the orders made on 18 May 2009 (being an order the Applicant pay one half of the Respondent’s costs of the Notice of Motion filed by the Applicant on 14 May 2009).
8. Exhibits be returned.
In the affidavit of personal service sworn by Malcolm Hill on 1 August 2012, Annexure “B” is a Certificate of Taxation dated 30 December 2011 between the parties in the following form:
I certify that pursuant to rule 40.20 of the Federal Court Rules the Applicant’s costs as between party and party, pursuant to Order 6 (and before any set off under Order 7) of the Orders of the Court made on 4 June 2009 are deemed to be $161,010.00.
Dr Hanna indicated that this matter originated in the Supreme Court of NSW, but was not sure how and why the matter was transferred to the Federal Court for the assessment of costs. He indicated to the Court that he is aware that there would be costs owing but that he was under the impression that they would be significantly less than the amount now being pursued.
Mr Atkinson submitted that none of the issues raised by Dr Hanna were in evidence in the form of a sworn affidavit or otherwise communicated formally. The Court acknowledges that, but provides Dr Hanna some latitude as he is a self represented litigant and the legal representation that had previously been provided to him had apparently been withdrawn but those circumstances are not before the Court.
Mr Atkinson confirmed that the proceedings were commenced in the Supreme Court of NSW, but were subsequently transferred to the Federal Court. There is no information before this Court in regards to the circumstances or reasons for the transfer. However, before that transfer took place the Justice hearing the application would have to be satisfied that the necessary requirements of the application were met. The second ground advanced by Dr Hanna in his Grounds of Opposition was wrong “Wrong jurisdiction – started in Supreme Court” which is an issue for the Federal Court and is not something that can be considered by this Court sitting in the Bankruptcy jurisdiction. If Dr Hanna believes that there is some aspect of the transfer that was inappropriate an appeal should have been filed in the Federal Court, but the period in which that appeal could be lodged has passed. Mr Atkinson, in oral submissions, from the bar table informed the Court that the Deed of Settlement to settle the judgment amount was drafted by solicitors that were acting for Dr Hanna at that time. From the information that is before the Court the jurisdiction claim advanced by Dr Hanna cannot be sustained and should be dismissed.
The first ground advanced by Dr Hanna was “Out of time of Application” although the precise nature of this claim is not abundantly clear. Dr Hanna, in his oral submissions, informed the Court that a period of five years had passed since these incidents had occurred, In relation to that claim the Orders made by his Honour Graham J were made on 4 June 2009 and the elements of the costs orders are clearly set out in those Orders (see [20] above). The Certificate of Taxation (see [21] above) is dated 30 December 2011. The Bankruptcy Notice BN 2994 of 2012 was issued by the Official Receiver on 24 May 2012. Section 41(3)(c)(i) states that a Bankruptcy Notice must be issued within six years of the Orders being made. The Bankruptcy Notice was issued within five months of the Certificate of Taxation and within 35 months of the Orders of his Honour Graham J. The requirements of this section are satisfied. In relation to the act of bankruptcy, this occurred when Dr Hanna failed to comply on or before 21 June 2012 with the requirement of the Bankruptcy Notice served on him on 31 May 2012. Regulation 4.02A of the FMC (Bankruptcy) Rules requires the Bankruptcy Notice to be served within six months of its issuance by ITSA. The Bankruptcy Notice was issued on 24 May 2012 and served on 31 May 2012 (Affidavit of Malcolm Hill sworn 12 June 2012). Section 44(1)(c) of the Bankruptcy Act requires a creditor’s petition to be presented within six months of the date of an act of bankruptcy. The act of bankruptcy occurred on 21 June 2012 and the Petition was presented in this Court on 12 July 2012. All the relevant time limits in this matter have been complied with and the ground of review fails and should be dismissed.
The third ground of opposition to the Petition raises issues of vindictiveness by refusal to negotiate a settlement. The affidavit Dr Hanna affirmed on 16 August 2012 in support of the Notice Stating Grounds of Opposition to the Petition states the following:
1. That the applicant was unwilling to negotiate a settlement.
2. The applicant wants to make me an example to deter other contractors. Vindictive nature.
In oral submissions Dr Hanna stated:
I would like this application for bankruptcy thrown out, because it’s an abuse of process. Mr Atkinson works for a $2 billion company, and they have a thousand doctors on contracts, and they’re using – the owner of the company has got a personal thing against me, and he is trying to bankrupt me as a message to all the other contractors to toe the line. He is not interested in recovering the money. He is not open to negotiation. And it’s purely a vindictive and a punitive measure. He is out to punish me rather than recover money, and I want that on the record
(Transcript 27 August 2012 pp.5 – 6)
Dr Hanna was then asked whether he received the Bankruptcy Notice and what response he made. He stated:
Yes. I tried to negotiate with my friend, but he wants no part of it.
This is the extent to which this ground is advanced with no further evidence in affidavit form or oral submissions.
Mr Atkinson, in oral submissions, indicated that his client seriously considered offers put by Dr Hanna in respect of the Bankruptcy Notice but his client rejected them as being unreasonable because the offers were well under 50 percent of the debt. I have formed the view that, in the absence of evidence of what offers were made to settle the matter this ground must also fail and should be dismissed.
Dr Hanna is attempting to pursue this matter as a self represented litigant and has failed to fully explore all the avenues available to him to possibly resist the various aspects of bankruptcy. Most noticeable is the absence of any submissions or evidence in respect of the issue of solvency. However, Dr Hanna’s oral submissions do not help him on this point. He stated:
… I borrowed money and paid them the money on the understanding that they would not be following up, and, if anything it would be minimal. But you know, I’ve got a lot of debts, and this will topple off everything, putting me in bankruptcy. …
(Transcript 27 August 2012 p. 6 line 39)
Given this limited information it is unlikely, even if Dr Hanna was legally represented, that the issue of solvency could be established.
The Notice of Opposition filed by Dr Hanna on 16 August 2012 should be dismissed. I am satisfied that Dr Hanna committed the act of bankruptcy alleged in the Creditor’s Petition. I am satisfied with the proof of other matters of which sub-section 52(1) of the Bankruptcy Act requires. Consequently a sequestration order against the estate of Nadi Kyrollos Hanna is made.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM
Associate:
Date: 6 September 2012
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