Jia v Tib Business Services Group Pty Ltd
[2022] FCA 306
•30 March 2022
FEDERAL COURT OF AUSTRALIA
Jia v TIB Business Services Group Pty Ltd [2022] FCA 306
File number: VID 745 of 2021 Judgment of: SNADEN J Date of judgment: 30 March 2022 Catchwords: PRACTICE AND PROCEDURE – application for default judgment against second respondent – where second respondent entered into personal insolvency agreement in accordance with pt X of the Bankruptcy Act 1996 (Cth) – where second respondent believed the proceeding incompetent by reason of his entry into personal insolvency agreement – whether applicant prevented from commencing a proceeding against second respondent – whether proceeding in respect of a provable debt – whether proceeding involves a demand in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust – applicant seeks damages for contravention of s 18 of the Australian Consumer Law – applicant’s claim in the nature of unliquidated damages otherwise than by reason of a contract, promise or breach of trust – applicant not prevented from commencing a proceeding against second respondent – second respondent ordered to file defence Legislation: Bankruptcy Act 1966 (Cth) pt X, ss 82, 187 229
Competition and Consumer Act 2010 (Cth) Schedule 2 (Australian Consumer Law) s 18
Federal Court Rules 2011 (Cth) r 16.32
Cases cited: CCA Systems Pty Ltd v Communications & Peripherals (Aust) Pty Ltd (1989) 15 ACLR 720
Polis v Zombor (2019) 134 ACSR 486
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 15 Date of hearing: 25 March 2022 Solicitor for the Applicant: Mr D Vlahos of David & Co Lawyers Solicitor for the First Respondent: Mr R Crittendon of Meridian Lawyers Counsel for the Second Respondent: The second respondent appeared in person ORDERS
VID 745 of 2021 BETWEEN: LIANGQIN JIA
Applicant
AND: TIB BUSINESS SERVICES GROUP PTY LTD
First Respondent
ANDREW ILLMAN
Second Respondent
ORDER MADE BY:
SNADEN J
DATE OF ORDER:
30 MARCH 2022
THE COURT ORDERS THAT:
1.The applicant’s interlocutory application of 22 February 2022 be dismissed.
2.By 4:00pm on 20 April 2022, the second respondent file and serve a defence.
3.Costs of and pertaining to:
(a)the applicant’s interlocutory application of 22 February 2022; and
(b)the case management hearing of 25 March 2022,
be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
SNADEN J:
By an interlocutory application dated 22 February 2022, the applicant moves the court for relief in the nature of default judgment against the second respondent. For the reasons that follow, no such judgment will be granted. Instead, I will extend the deadline by which the second respondent must file his defence. In doing so, I should be understood to have accepted the applicant’s central contentions, upon which some brief elaboration appears below. Nonetheless, I do not consider that the interests of justice require the entry at this stage of judgment against the second respondent.
Some background is appropriate.
The applicant is the owner of a residential property that was let to a bankrupt tenant who defaulted on the rent that was to be paid. That tenancy was the subject of representations that were said to have been made to the applicant by the second respondent. At the time, he was a director of the first respondent, on behalf of which he is said to have acted when the representations were allegedly made.
The relevant representations are said to have misled or deceived the applicant into entering the tenancy agreement in respect of which the default that is described above transpired. The applicant contends that they were made in contravention of s 18 of the Australian Consumer Law. She seeks to recover from the respondents the amount of unpaid rent, which she constitutes as an amount that she lost as a result of the misleading or deceptive conduct upon which she sues. She also seeks to recover the legal costs that she incurred in pursuing that unpaid rent in proceedings before the Victorian Civil and Administrative Tribunal.
The applicant’s originating application was filed on 13 December 2021, as was a statement of claim bearing that same date. On 7 February 2022, the first respondent filed its defence. The second respondent has not filed anything. It is in respect of that inaction that the present (interlocutory) application is pressed.
The second respondent is (or, at the very least, claims to be) a party to a personal insolvency agreement entered into in accordance with Part X of the Bankruptcy Act 1966 (Cth) (the “Act”). That agreement (the “PIA”) was (or is said to have been) executed on 3 December 2021.
The matter was scheduled for a case management hearing to take place on Friday, 25 March 2022. The interlocutory application was filed after that listing was advised, and was subsequently listed for hearing on the same day. At that hearing, the applicant relied upon two affidavits affirmed by her solicitor, Ms Grant. Additionally, the court was provided with (and no objection was taken to its receipt of) a copy of the PIA, together with related correspondence from the trustee party thereto, Mr Matthews.
At the hearing of the interlocutory application, the second respondent contended (or, perhaps more accurately, indicated that he understood) that he was not required to file a defence because, by operation of s 229 of the Act, the action that the applicant pressed against him was incompetent. That was said to be the inescapable consequence of the fact that he was party to the PIA. The applicant maintained that her application was not barred by s 229 of the Act because the amount that she hopes to recover is not a “provable debt” for the purposes of that section. It was otherwise not apparently in contest—and, in any event, could hardly be doubted—that the second respondent was, by reason of his failure to file a defence, in default of the requirements imposed by r 16.32 of the Federal Court Rules 2011 (Cth) (the “Rules”).
Part X of the Act is headed, “personal insolvency agreements”. Amongst other things, it makes provision for the making and operation of agreements such as the one in present focus. Section 229 of the Act assumes particular significance here. It relevantly provides as follows:
229 Personal insolvency agreement to bind all creditors
(1) A personal insolvency agreement that:
(a) is entered into in accordance with this Part; and
(b) complies with the requirements of this Part;
is, upon being duly executed by the debtor and the trustee, binding on all the creditors of the debtor.
(2)If a personal insolvency agreement has become binding on the creditors of the debtor, it is not competent for a creditor, so long as the agreement remains valid:
…
(c)to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
The meaning of “provable debt” is the subject of s 187(2) of the Act:
(2)In this Part, a reference, in relation to a personal insolvency agreement, to a provable debt shall be read as a reference to a debt or liability that would have been a provable debt in the debtor’s bankruptcy if the debtor had become a bankrupt on the day on which he or she executed the personal insolvency agreement.
Section 82 of the Act is headed “debts provable in bankruptcy”. Relevantly, it provides as follows:
(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
…
(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
…
A claim for damages arising from misleading or deceptive conduct is a demand “…in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust”: CCA Systems Pty Ltd v Communications & Peripherals (Aust) Pty Ltd (1989) 15 ACLR 720, 730-731 (Giles J); Polis v Zombor (2019) 134 ACSR 486, 497 [39] (Murphy J). Such claims are not provable in bankruptcy: the Act, s 82(2). The commencement of an action in this court in respect of such a claim—and the constituent steps that might be taken in prosecuting such an action—are not matters that fall within the contemplation of s 229(2)(c) of the Act.
It follows that s 229(2)(c) of the Act does not here (if it might ever) excuse the second respondent from the need to comply with the Rules. I accept the applicant’s submission that the second respondent’s failure thus far to file a defence to the action commenced against him pits him in default of that obligation.
That default has occurred because the second respondent has laboured under an incorrect appreciation of the applicable statutory scheme. His mistake should be corrected; but not by the granting of judgment at this juncture. Instead, I will extend the deadline by which he is to file and serve his defence. I consider that 21 days should suffice.
As I envisaged at the conclusion of the hearing on Friday, 25 March 2022, I will otherwise invite the parties to discuss and agree upon other directions that the court should impose by means of case management. Given the relatively modest quantum of what is claimed, it is to be expected that one such direction will involve the early referral of the matter for mediation before a registrar of the court; but that can be left to the parties to consider at this stage.
I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Snaden. Associate:
Dated: 30 March 2022
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