Jin Hyeong Haar v Seung Wook Kim - [2006] FMCA 903

FEDERAL MAGISTRATES COURT OF AUSTRALIA

JIN HYEONG HAAR & ANOR v SEUNG WOOK KIM

[2006] FMCA 903

BANKRUPTCY – Creditor’s petition – review of sequestration order made by Registrar – consideration relevant to review.

Bankruptcy Act 1966 (Cth), ss.153B, 309
Civil Procedure Act 2005 (NSW), s.101
Federal Magistrates Act 1999 (Cth), s.104
Federal Magistrates Court Rules 2001 (Cth)

Adelaide Bank Limited v Badcock [2002] FMCA 10
Barber v Bone Thorpe International Pty Ltd [2001] FMCA 4
Cottrell v Wilcox [2001] FCA 866
G Ferella v Otvosi & Anor [2006] FMCA 334
Keily & Anor v Shortall [2004] FMCA 609
Martin v Commonwealth Bank of Australia [2001] FCA 87

Applicant Debtor:

JIN HYEONG HAAR

Respondent Creditor:

SEUNG WOOK KIM

File Number:

SYG3424 of 2005

Judgment of:

Lloyd-Jones FM

Hearing dates

9 May & 2 June 2006

Last Submission filed:

12 June 2006

Delivered at:

Sydney

Delivered on:

30 June 2006

REPRESENTATION

Solicitors for the Applicant Debtor:

Mr A Tees of Whitehead Cooper Williams

Counsel for the Respondent Creditor:

Ms J Soars

Solicitors for the Respondent Creditor:

PSK Legal

ORDERS

The application for review of the Registrar’s orders made on

16 February 2006 is dismissed.
The debtor shall pay the creditor’s costs, which shall be paid out of the bankruptcy estate of the debtor.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT

SYDNEY

SYG3424 of 2005

JIN HYEONG HAAR

Applicant Debtor

And

SEUNG WOOK KIM

Respondent Creditor

REASONS FOR JUDGMENT

The proceedings

This is an application for review by Jin Hyeong Haar (the debtor), filed on 9 March 2006. The application for review seeks to have the sequestration order made against the estate of Jin Hyeong Haar by Registrar Tesoriero on 16 February 2006 annulled, or if not, to have the orders stayed until an appeal in the District Court of New South Wales has been finalised.
The sequestration order was made in this matter upon a bankruptcy notice, which in turn relied on a judgment against the debtors jointly who owed the applicant creditor an amount of $225,783.68. That amount is due under final judgment obtained in the District Court of New South Wales against the first respondent on 24 June 2005 and the second respondent on 13 July 2005. Interest pursuant to s.101 of the Civil Procedure Act 2005 (NSW) at the rate of 9% per annum from 14 July 2005 (the date after judgment was obtained against the second respondent) to 17 November 2005 (the date the act of bankruptcy was committed), which amounts to $7,014.76. This makes a total sum of $232,798.44. The debt is for an unsecured loan from the applicant creditor to the respondent debtors. The second respondent owes the applicant creditor a further sum of $18,000, but this amount is not in issue in these proceedings.
The application for review was originally filed by the applicant debtor when he was unrepresented. He sought to have the bankruptcy annulled, essentially on the ground that he was not present in Australia when the matter was heard and did not have a chance to have a reasonable or fair hearing his absence. The applicant is now represented by Mr Tees and who advised the Court that the applicant claims that he did not have an adequate opportunity for a fair hearing for the simple reason that he was not in the jurisdiction and indeed was not served with many of the documents. The applicant claims he was not aware of their existence. Some of the documents, such as the affidavit of service, creditor’s petition, bankruptcy notice, verifying petition and affidavit of debt, were not seen by the applicant until the morning of this hearing.
Mr Tees submits that substituted service was been sought and consequently, there was no personal service for a substantial number of the documents. Mr Tees submits that I should infer that the applicant would not have had personal knowledge of the content of the documents. Also that the applicant did not have adequate opportunity to obtain legal advice and institute matters in the appropriate way and be represented at the hearing. On that basis, it was submitted that the sequestration order should not remain and if the bankruptcy itself cannot be annulled, the matter should be reheard.
I do not accept this submission, as the Court file reveals that an application for substituted service was filed in this matter on 12 December 2005. That application sought, pursuant to s.309 of the Bankruptcy Act 1966 (Cth) (“the Act”), that personal service on the first and second respondents of the creditor’s petition, together with the affidavit verifying the petition, be dispensed with on the following terms:
1a.That a signed and sealed copy of the Petition and the affidavit verifying the Petition, together with a sealed copy of the Court’s orders for substituted service, be sent by ordinary pre-paid post addressed to the Respondent Debtors at each of the following addresses:
i) 27 Evans Street, Newington, 2127 (First Respondent’s place of residence);
ii) 7A Bower Street, Bankstown, 2200 (Second Respondent’s place of residence).
2.That the Petition be deemed to be served on the Respondent Debtors 4 days after service in accordance with order 1.
In support of that application, an affidavit sworn on 8 December 2005 by John Reese, licensed commercial agent, sets out the steps that he took in attempting to serve the relevant documents. On 22 December 2005, Registrar Tesoriero made the following orders:
1.Personal service of the Creditor’s Petition (filed 23 November 2005, “the Petition”) and affidavit of Michael Kim sworn 22 November 2005 verifying the Petition (“the affidavit verifying the Petition) be dispensed with.
2.A signed and sealed copy of the Petition and affidavit verifying the Petition together with a sealed copy of this order, be sent by ordinary pre-paid post addressed to the Respondent Debtors at each of the following addresses:
i) 27 Evans Street, Newington, 2127 (First Respondent’s place of residence);
ii) 7A Bower Street, Bankstown, 2200 (Second Respondent’s place of residence).
3.That the petition would be deemed to be served on the Respondent Debtors 7 days after service in accordance with order 2.
4.The hearing date of the Petition be amended to 10.15am on 16 February 2006 at the Law Courts Building, Queens Square, Sydney, 2000.
Mr Tees indicates that his client relies on the application for review filed on 9 March 2006 and two affidavits. The first sworn 9 March 2006 and the second on 9 May 2006. Significant objections were raised to the second affidavit, resulting in a substantial part of it being rejected. In order to avoid a further adjournment to redraw the affidavit, it was agreed that reliance would be on the amended statement of liquidated claim in the District Court proceedings, which clearly sets out what the allegations were. A copy of the original defence, filed by the debtor but not pursued, and default judgment, complete the relevant documents. These documents raise the issues in a proper way and allow the hearing to proceed. The documents were admitted to provide a factual background to what the parties allege. The documents were not admitted for the purpose of proof of facts asserted.
The application for review filed on 9 March 2006 does not identify which sections of which legislation the debtor makes his application under. I again note that applicant seeks to review the decision of bankruptcy and to either annul or have the orders stayed until the outcome of an appeal to the District Court can be finalised. Therefore, I will treat this application as having been made under s.104(2) and (3) of the Federal Magistrates Act 1999 (Cth). These subsections deal with review of a decision of a Registrar who has exercised any powers of the Federal Magistrates Court under ss.102(2) or 103(1).
A review under s.104(3) of the Federal Magistrates Act requires the Court to hear the creditor’s petition de novo: Martin v Commonwealth Bank of Australia [2001] FCA 87, Cottrell v Wilcox [2001] FCA 866, Adelaide Bank Limited v Badcock [2002] FMCA 10 and G Ferella v Otvosi & Anor [2006] FMCA 334. In the circumstances, if the creditor’s petition is to be heard de novo, each of the affidavits relied upon in obtaining the original sequestration order from the Registrar is to be read. Ms Soars indicated that she could identify all of those affidavits and take the Court to them on a formal basis.
The nature of the applicant’s application in that the applicant was not provided sufficient notice of the return of the creditor’s petition to attend or be represented at the hearing. The other issue relates to the default judgment obtained by the creditor in the New South Wales District Court. There is no dispute, as I understand it, that the creditor seeking the sequestration order had not formally complied with all of the Court Rules. Both parties agreed that the reading of the affidavits in the sequestration order hearing could be done by way of concession, dispensing with the need to take the Court to each affidavit filed by the applicant and to have them formally read. Consequently, the following documents were handed up on the basis of that concession, should the sequestration order be annulled and the creditor’s petition be reheard:
a)
The original creditor’s petition, which was presented on

20 November 2005 (it is noted that leave was given at the hearing of the creditor’s petition to amend paragraphs 5(a) and 5(b) to read 15 November 2005, and personal service was dispensed with);
b)The affidavit verifying the petition, sworn on 22 November 2005 by Michael Kim;
c)
The affidavit of service of a bankruptcy notice, sworn on

21 November 2005 by Michael Kim;
d)Two affidavits of Michael Kim, sworn on 21 and 22 November 2005 respectively;
e)The affidavit of service of the petition, sworn on 25 January 2006 by Paul S Kwong;
f)An updated affidavit of debt, sworn on 15 February 2006 by Michael Kim;
g)An affidavit of search of Michael Kim, sworn on 15 February 2006.
Mr Tees, for the applicant, made brief submissions which repeat the essence of the applicant’s case as previously set out at [3] and [4] above. Ms Soars, for the respondent, submits that the applicant’s affidavit of 9 March 2006, which is in evidence in these proceedings, did not indicate a foreign address. It was acknowledged that the debtor has given evidence that he does from time to time go to New Zealand to conduct business. There is no evidence before the Court that the debtor does not reside in Australia, or that he was not resident in Australia at the time these proceedings were commenced and disposed of by the making of the sequestration order.
Ms Soars submits the affidavit of 9 March 2006 contains a purported letter to the Registrar dated 15 February 2006. It is submitted that the affidavit indicates that Mr Haar was aware that the proceedings would come before the Court, that it was of a serious nature, and that it may lead to his bankruptcy. Mr Haar took no steps to attend before the Court on that date, nor did he take proper steps to engage a solicitor to attend Court. I accept the submission that this does show that Mr Haar was on notice of the proceedings before the Court.
It is submitted that irrespective of whether or not Mr Haar attended the Court on 16 February 2006, a notice of opposition was not filed. Neither was an affidavit in support of opposition to the creditor’s petition filed.
The default judgment in the District Court was entered on 24 June 2005. This is recorded in the certificates of judgment attached to the bankruptcy notice. The judgment was for a sum over $225,000. Before the Court is a copy of the defence that Mr Haar proposed to run in the District Court proceedings. This was not pursued, resulting in the default judgment being entered. It is submitted that Mr Haar had every opportunity to defend the District Court proceedings if he wished, but has not done so. Mr Haar was clearly on notice of the creditor’s petition, which was returnable on 16 February 2006. He did not attend nor instruct solicitors with sufficient time for them to attend: Barber v Bone Thorpe International Pty Ltd [2001] FMCA 4.
Subsequent to the hearing of 9 May 2006, Ms Soars notified the Court that a further authority relevant to this matter had been identified and sought to have it brought to the Court’s attention. This was opposed by Mr Tees. The matter was listed for mention on 2 June 2006. On that date, I heard arguments and indicated that I would receive the further authority and gave the parties an opportunity to file submissions in relation to it.
The additional authority handed up in Court on 2 June 2006 was a decision of McInnis FM, Keily & Anor v Shortall [2004] FMCA 609 (“Keily”), delivered on 6 September 2004. Ms Soars, in written submissions filed on 12 June 2006, submits that the case of Keily is not binding on me, but is analogous on the facts, persuasive as to its reasons, and relevant to the applicant’s application for the following reasons:
3. The facts of Keily were as follows:
a)    In Keily the Court was determining a similar application, being for the review of a Registrar’s decision to make a sequestration order;
b)    It was not clear in Keily (at [6]) whether the application was for a rehearing or a form of application for annulment and the Court held that the application for review deficient in that it sought to neither refer to the orders to be reviewed or gave any indication of the orders now sought (at [7]). (The application filed by Mr Haar in section D “orders sought” seeks to have the Registrar’s decision annulled or the orders stayed);
c)    The bankruptcy notice in Keily was based on a default judgment and at the time of the hearing of the application, no application to set aside the default judgment had been made (at [7]);
d)    The evidence in Keily relied upon consisted of an affidavit which:
“in brief terms, asserts clearly the debt which was the subject of the judgment in the state Magistrates Court to which I have referred was not his debt but rather a debt between the creditors and the debtor’s brother. He claims the debt was for parking fines incurred by the creditors for his brother and claims to be in no way responsible for the debt. He otherwise takes issue with what is described as services rendered or money lent by the creditors”.
There are a number of similarities between the application by Mr Haar and Keily.
Ms Soars submits that His Honour in Keily at [8]–[9] dismissed the application as deficient on the face of it and its content as to provide no proper basis upon which the Court could entertain an application in its present form. In particular, in so far as the application was for annulment under s.153B of the Act, there was no material before that Court that would justify going behind the judgment in the state Magistrates Court where the default judgment was obtained. This was despite concerns raised by the debtor in relation to the judgment. Nor was there any other material before that Court as to solvency or any other issue that might be considered relevant. His Honour was not satisfied that it could properly be said that the sequestration order ought not to have been made.
Ms Soars submits that in relation to the application by Mr Haar, as in Keily, there is no material before this Court that would justify my going behind the default judgment that was obtained over 12 months ago in the District Court. There is no application by Mr Haar to set aside the default judgment nor any real evidence put forward to support his assertion that it should be set aside. Mr Haar did not put any evidence before the Court as to his solvency and it is submitted that as that is absent, and inference should be drawn against him. In the affidavit sworn on 9 March 2006 and in his application, Mr Haar gave the address of 27 Evans Street, Newington. Hence that is the address to which the bankruptcy notice and all documents in the proceedings were served. It is submitted that Mr Haar was on notice of these proceedings for some time and that he did not take timely steps to deal with the proceedings.
Ms Soars submits that the Court would be justified in dismissing

Mr Haar’s application as deficient and providing no proper basis upon which the Court could entertain the application. Ms Soars submits that even if Mr Haar had been present at the hearing of the petition on

16 February 2006, or if it was adjourned to a date on which he could be present, the Registrar would have been justified in making the sequestration order, as there was no material before the Court by Mr Haar to support his opposition to the making of the sequestration order.
Ms Soars submits that on discretionary grounds, the Court would be justified in dismissing the application in any event. This is given the lack of evidence of solvency and the lack of an adequate explanation by Mr Haar for failing to take timely and appropriate steps to set aside the default judgment, or to properly identify a factual basis on which he could establish a challenge to the entry of the default judgment against him.

Conclusion

At the time of this hearing there has been no application by or on behalf of the debtor to set aside the judgment of the District Court of New South Wales, file number 2139 of 2004, made on 24 June 2005. Subsequent to and dependant on the judgment, a bankruptcy notice was issued which resulted in an act of bankruptcy. Following that event a creditor’s petition was issued, ending with a sequestration order based on that judgment.
The application for review of the sequestration order is deficient but some explanation for that may be found in that it was drawn by a self-represented litigant. However, since that application was filed, the applicant became legally represented. No discernable steps have been taken to rectify those pleadings. Despite these deficiencies, the application constitutes an annulment application, or alternatively a hearing de novo. The central claim of the applicant is that he was not personally served and therefore unaware of the proceedings. This claim seems to have been in spite of the issue of substituted service orders on 22 December 2005. Attempts were made to serve relevant documents on the registered business address and the debtor’s residential address without success, leading to the application for substituted service.
The debtor’s affidavit of 9 March 2006, which was accepted into evidence, contains annexures that indicate that the debtor left Australia for New Zealand on 13 February 2006. This was three days prior to the scheduled hearing of the creditor’s petition. Further, the facsimile transmission addressed to the Registrar on 15 February 2006 refers to and acknowledges the hearing scheduled on 16 February 2006. This indicates that the debtor was in receipt of the documents, the subject of the substituted service.
There is no material before me which would justify this Court going behind the judgment of the District Court, nor is there any material before me as to solvency or other issues I might consider relevant. I am not satisfied that it could properly be said the sequestration order ought not to have been made. For these reasons, the application for review filed 8 March 2006 is dismissed.
The applicant debtor shall pay the creditor’s costs, paid out of the bankruptcy estate of the debtor.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.

Associate:

Date: 29 June 2006