Johnson Lawyers Legal Practice Pty Ltd v Kedem
[2015] FCCA 809
•16 April 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| JOHNSON LAWYERS LEGAL PRACTICE PTY LTD v KEDEM | [2015] FCCA 809 |
| Catchwords: BANKRUPTCY – Review of decision of Registrar to make sequestration order – other sufficient cause for not making a sequestration not established – sequestration order of Registrar Bochner on 16 June 2014 is affirmed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.33 & 52(1) & (2) Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), Part 4 & r.4.06 |
| Kedem v Johnson Lawyers Legal Practice Pty Ltd [2012] FMCA 1118 Kedem v Johnson Lawyers [2014] HCASL 117 Kedem v Johnson Lawyers Legal Practice Pty Ltd [2014] FCAFC 3 |
| Applicant: | JOHNSON LAWYERS LEGAL PRACTICE PTY LTD ACN 087 954 498 |
| Respondent: | EINAV KEDEM |
| File Number: | ADG 327 of 2012 |
| Judgment of: | Judge Simpson |
| Hearing date: | 11 August 2014 |
| Date of Last Submission: | 11 August 2014 |
| Delivered at: | Adelaide |
| Delivered on: | 16 April 2015 |
REPRESENTATION
| Counsel for the Applicant: | Ms Sinickas |
| Solicitors for the Applicant: | Johnson Lawyers Legal Practice |
| The Respondent: | Mr Kedem in person |
ORDERS
The Application for Review of a Registrar’s decision filed 18 June 2014 is dismissed.
The orders of 16 June 2014 are affirmed.
I will hear the parties in relation to any consequential orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 327 of 2012
| JOHNSON LAWYERS LEGAL PRACTICE PTY LTD ACN 087 954 498 |
Applicant
And
| EINAV KEDEM |
Respondent
REASONS FOR JUDGMENT
Introduction
To avoid confusion, I propose to continue to refer to the parties by the titles that they had in the earlier hearing before Registrar Bochner. Johnson Lawyers Legal Practice Pty Ltd will be referred to as ‘the Applicant’ and Einav Kedem will be referred to as ‘the Respondent’.
I have before me an Application for Review filed on 18 June 2014 by the Respondent for review of a decision of Registrar Bochner made on 16 June 2014 at which time she made a sequestration order against the estate of the Respondent and an order for costs.
The Application for Review seeks review of all orders made on 16 June 2014. The orders were as follows:
“1.A sequestration order be made against the estate of Einav Kedem.
2.The Applicant creditors costs (including any reserved costs) be fixed at $6,312.00 and be paid from the estate of the Respondent debtor in accordance with the Bankruptcy Act 1996.”
The orders sought by the Respondent in the Application for Review are as follows:
“1.To stay the order attached until further notice of bankruptcy made on 16 June 2014.
2.To stay the bankruptcy sequestration because I’m waiting for the reasons of the Registrar’s decision so I can appeal it and was told that I can appeal it within 21 days.
3.I will [sic] further reasons after I get the [sic] Registrar Bochner’s reasons, copy attached.
4.To stay the Applicant creditor’s costs of $6,312.
5.To stay the consent to act as trustee of John Sheahan.”
The Respondent has been unrepresented throughout. Whilst not in the orders sought by the Respondent, I have proceeded on the basis that the Respondent also seeks an order that the sequestration order be dismissed. The hearing has proceeded on that basis.
The hearing before me was also on the basis of it being a hearing de novo. It is not an appeal.
The Applicant relied upon the following documents:
a)Three affidavits of John William James, a solicitor in the employ of the Applicant, filed on 4 February 2013; 15 August 2013; and 26 May 2014;
b)Two affidavits of Freya Pamela Sinickas, a solicitor in the employ of the Applicant, filed on 5 August 2014 and 11 August 2014;
c)The creditor’s petition filed on 18 December 2012; and
d)A Schedule of the costs sought by the Applicant when the matter was before Registrar Bochner.
The Respondent relied upon the following documents:
a)A Record of Outcome of Supreme Court proceedings, Action Number SCCIV-13-1119 in which the Respondent was appellant and the Applicant was Respondent and dated 23 June 2014;
b)Three affidavits of the Applicant filed on 6 June 2014; 4 August 2014; and 6 August 2014; and
c)A Water Use Invoice from South Australian Housing Trust dated 30 May 2014 and said by the Applicant to prove that he did not own any real estate property but rented a Housing Trust property.
Section 52(1) of the Bankruptcy Act 1966 (Cth) (“the Act”) provides that at the hearing of a Creditor’s Petition the court must have proof of:
a)the matters stated in the petition;
b)service of the petition; and
c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing.
In addition to the matters referred to in s.52(1), the Court also has to be satisfied that the requirements of r.4.06(3) of the Federal Circuit Court (Bankruptcy) Rules 2006 (“the Bankruptcy Rules”) have been complied with. Rule 4.06 relevantly provides:
“4.06 Additional affidavits to be filed before hearing
(1)Before the hearing of a creditor’s petition, the Applicant creditor must file the affidavits required by this rule.
(2)The Applicant creditor must file an affidavit that:
(a)states that the documents required to be served under rule 4.05 have been served and when and how they were served; and
(b)has attached to it a copy of the documents that were served and proof of service in relation to the documents.
(3)The Applicant creditor must file an affidavit of a person who has searched, or caused a search to be made, in the National Personal Insolvency Index no earlier than the day before the hearing date for the petition that:
(a)sets out the details of any references in the Index to the debtor; and
(b)states that there were no details of a debt agreement, about the debt on which the Applicant creditor relies, in the Index:
(i) on the day when the petition was presented; and
(ii) on the day when the search was made; and
(c)has attached to it a copy of the relevant extract of the Index.
(4)The Applicant creditor must file an affidavit of a person who knows the relevant facts that:
(a)was sworn as soon as practicable before the hearing date for the petition; and
(b)states that each debt on which the Applicant creditor relies is still owing.
(5)The Applicant creditor must file a search affidavit if the debt stated in the petition is an amount payable to the Applicant creditor under a judgment of a court that ordered the amount to be paid into the court.”
If I am satisfied with the proof of these matters, I may make a sequestration order against the estate of the debtor. However, by reason of s.52(2) of the Act, if the Court is not satisfied with the proof of any of these matters, it may dismiss the petition.
In addition, the Court may dismiss the petition if it is satisfied by the debtor that:
a)he or she is able to pay his or her debts; or
b)for any other sufficient cause a sequestration order ought not to be made.
On the evidence before me, I am satisfied that the matters referred to in s.52(1) of the Act and Part 4 of the Bankruptcy Rules have been fully complied with. The Respondent has not argued otherwise.
The Respondent has not attempted to convince the Court that he comes within s.52(2)(a) of the Act by submitting that he can pay his debts. No evidence of solvency has been tendered and he has not complied with the Bankruptcy Notice.
The remaining issue therefore is whether there is “any other sufficient cause”, within the meaning of that expression as used in s.52(2)(b), why a sequestration order should not be made.
Applicant’s case
The petition relies on acts of bankruptcy resulting from the Respondent’s failure to comply, on or before 16 July 2012, with the requirements of a Bankruptcy Notice served on him on 10 April 2012, or to satisfy the Court that he had a counter-claim, set-off or cross-demand equal to or more than the sum claimed in the Bankruptcy Notice, being a counter-claim, set-off or cross-demand that he could not have set up in the action in which the judgment referred to in the Bankruptcy Notice was obtained.
On 24 April 2012 the Respondent applied to have the Bankruptcy Notice set aside. This application was heard by me and ultimately was dismissed by me on 16 July 2012[1]. The Respondent then appealed to the Federal Court. His Honour Besanko J heard the appeal and made his decision dismissing the Respondent’s application on 30 November 2012.
[1] See Kedem v Johnson Lawyers Legal Practice P/L [2012] FMCA 1118
The Respondent debtor owes the Applicant creditor various sums totalling $8,261.55, being the amounts due under the following judgments:
(a)Judgment entered in Supreme Court (SA) Action No. 1704 of 2010 for $1,000 on 17 May 2011, plus accrued interest of $201.24;
(b)Judgment entered in District Court (SA) Action No. 1271 of 2010 for $3,800 on 26 May 2011, plus accrued interest of $754.65;
(c)Judgment entered in District Court (SA) Action No. 1271 of 2010 for $250 on 23 August 2011, plus accrued interest of $43.10;
(d)Judgment entered in Supreme Court (SA) Action No. 1704 of 2010 for $814.65 on 3 November 2011, plus accrued interest of $123.15; and
(e)Judgment entered in Federal Magistrates Court (SA) Action No. ADG 80 of 2012 on 16 July 2012 for $500, plus accrued interest of $39.47.
Respondent’s case
The Respondent submits that he does not owe the sums sought by the Applicant. Prior to the hearing, the Respondent provided the Court with an outline of his argument. His position is clearly identified in a small section of the outline in which he said (emphasis added):
“I do not seek to address each and every paragraph (of the Applicant’s outline of argument) but what I do wish to submit is that it was never contrary to the public interest for the court to make an order in my favour in terms of the application. The effect of the decision would not have been to prop up an insolvency. In my affidavit affirmed on 4 August 2014, this establishes in my view, that I am solvent and that solvency has never been the issue. My issue has always been that I did not owe the Applicant the money, the subject of the judgment hence the appeals that flowed from it. On that basis, I am not an insolvent person seeking a right to challenge a debt in respect of a petition as is referred (to in the Applicant’s outline). … The history is not in issue, the question is, and remains, is there a debt due and owing? I say no, they say yes.”
A further issue arises in the Respondent’s case as to whether there should have been an adjournment of the hearing of the petition. It is part of the Respondent’s case that the hearing should have been adjourned to await the outcome of the Supreme Court proceedings before Kourakis CJ.
Analysis
As mentioned earlier, the formalities have all been attended to by the Applicant and a prima facie case for a sequestration order made out. There is no issue raised by the Respondent in relation to a counter-claim, set-off or cross-demand. The remaining issue is therefore whether the Respondent has satisfied the Court that for other sufficient cause a sequestration order ought not to be made. If other sufficient cause is proven, then the Court may dismiss the petition. In my opinion, no other sufficient cause has been made out.
Was there a debt?
In each of his three affidavits relied upon the Respondent alludes to comments that he says were made by the Chief Justice of the Supreme Court in appeal proceedings that were before his Honour. The Respondent has not put any admissible material before this Court concerning the Supreme Court proceedings that would provide sufficient cause for this Court to not make a sequestration order.
In the circumstances of this case I do not consider it necessary or appropriate to go behind the judgments obtained by the Applicant. There is no prima facie case of fraud, collusion or miscarriage of justice.
On 25 June 2014, Registrar Bochner gave extensive and well considered reasons for making her orders of 16 June 2014. I agree with the learned Registrar that, for the reasons she gave, the interest of justice are best served by the making of the sequestration order.
Should there have been an adjournment of the proceedings?
Adjournments of bankruptcy proceedings are dealt with in s.33 of the Act. The section provides as follows:
“33 Adjournment, amendment of process and extension and abridgment of times
(1)The Court may:
(a)upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally;
(b)at any time allow the amendment of any written process, proceeding or notice under this Act; or
(c)extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.”
It is obviously a discretionary matter as to whether the proceedings should be adjourned. I formed the strong view that, irrespective of the outcome of the Supreme Court proceedings which dealt with only one of the judgment debts, the Respondent’s case that a sequestration order should not be made did not have any merit. On the basis of the limited information provided, I considered that the proceedings before Kourakis CJ were also unlikely to be successful. The Respondent has a penchant for pursuing litigation without any proper regard to their merits.
Had the Respondent seriously wanted to have the proceedings adjourned to await the outcome of the Supreme Court proceedings, I would have expected him to provide the Court with detailed information about those proceedings and the likely date that the matter would be finalised.
I note in the affidavit of Ms Sinickas, filed on 11 August 2014, that on 6 August 2014 a decision was handed down from the High Court of Australia in the matter of Kedem v Johnson Lawyers [2014] HCASL 117 dismissing the Respondent’s appeal from the Full Court of the Federal Court of Australia in Kedem v Johnson Lawyers Legal Practice Pty Ltd [2014] FCAFC 3.
Conclusions
I find that there is no other sufficient cause, within the meaning of s.52, why a sequestration order should not be made and therefore dismiss the application for review.
I affirm the sequestration order and the costs order of Registrar Bochner made on 16 June 2014.
I make the orders to be found at the beginning of these reasons.
I will hear the parties about any consequential orders that are needed.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge Simpson
Associate:
Date: 16 April 2015
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