Jones v Riley
[2023] FedCFamC2G 436
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Jones v Riley [2023] FedCFamC2G 436
File number(s): SYG 1535 of 2022 Judgment of: JUDGE D HUMPHREYS Date of judgment: 16 May 2023 Catchwords: BANKRUPTCY – review of Registrar’s decision – ongoing appeal relating to judgment debt– whether appeal relevant to sequestration order – application for adjournment. Legislation: Bankruptcy Act 1966 (Cth) ss 52, 156A Division: Division 2 General Federal Law Number of paragraphs: 27 Date of last submission/s: 16 May 2023 Date of hearing: 16 May 2023 Place: Parramatta Solicitor for the Applicant: Mr Vosnakis Solicitor for the Respondent: Mr Shohmelian ORDERS
SYG 1535 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ALYCE VALERIE JONES
Applicant
AND: MICHAEL WINSTON RILEY
Respondent
order made by:
JUDGE D HUMPHREYS
DATE OF ORDER:
16 MAY 2023
THE COURT ORDERS THAT:
1.The application for an adjournment is refused.
2.The application for review is dismissed.
3.Costs as agreed or assessed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Ex Tempore as revised from the TrancriptJUDGE D HUMPHREYS
INTRODUCTION
This is judgment in the matter of Alyce Valerie Jones and Michael Winston Riley. Alyce Jones is the applicant in substantive proceedings and the respondent to an application by Mr Riley seeking to set aside a sequestration order made by Registrar Ditton of this Court against Mr Riley on 29 November 2022. The following history is uncontested.
On 30 October 2019, a statement of claim was filed in the District Court, matter number 201900340904, seeking judgment against Mr Riley in respect of breaches of obligations by Mr Riley to repay a loan to Ms Jones. Mr Riley was served with the initiating process on 16 March 2020.
On 27 April 2020, with no Defence having been filed, judgment was entered against Mr Riley in the sum of $148,581.42. On 25 June 2020, an amount of $13,185.46 was recovered from a bank account in the name of Mr Riley pursuant to a garnishee order issued to the ANZ Bank.
On 28 July 2020, solicitors acting for Mr Riley sought various documents from the solicitors acting for Ms Jones, including a copy of the Statement of Claim, Affidavit of Service and the judgment. They were provided on 6 August 2020.
On 11 May 2022, a Bankruptcy Notice was filed with the Australian Financial Security Authority, numbered BN 256202. On 17 May 2022, Mr Riley was served with a Bankruptcy Notice. On 3 June 2022, Mr Riley filed a notice of motion in the New South Wales District Court seeking to set aside the judgment debt.
On 9 August 2022, Judge Abadee of the Distinct Court varied the debt to the amount of $129,800.83. His orders included the following:
2. Subject to orders 3 & 4, the defendant is to pay the plaintiff post-judgment interest under section 101 of the Civil Procedure Act and the varied judgment sum;
3. The defendant is to make any application, supported by a short outline of submissions (not exceeding 2 pages) as to why post-judgment interest should not be ordered on the varied judgment sum within 3 business days;
4. In the event that no application (contemplated by order 3) is made within the stipulated period, order 2 is to take effect;
5. The defendant has to pay the plaintiff's costs on the defendant’s notice of motion and also any costs thrown away by a variation to the judgment sum;
6. Any application for a variation to order 5 to be brought within 14 days.
Mr Riley did not make any application in respect of post-judgment interest or the variation of order 5.
On 23 August 2022, an application was filed with the Federal Court of Australia under the proceeding number NSD426/2022 and was dismissed by consent.
On 13 September 2022, a new Bankruptcy Notice, number BN 257473, was issued against Mr Riley. The Bankruptcy Notice was served by consent on Mr Leon Shohmelian, Solicitor, who confirmed that he had instructions to accept service on behalf of Mr Riley. Following confirmation that he also held instructions on behalf of Mr Riley to accept service of a Creditor's Petition, the Creditor’s Petition was served on Mr Shohmelian on 25 October 2022 with a return date on 20 November 2022.
On 29 November 2022, Registrar Ditton of this Court made orders, inter alia, that the estate of Mr Riley be sequestrated under the Bankruptcy Act 1966 (Cth) (“the Act”). The Court notes that the commission of the Act of Bankruptcy was set as 4 October 2022. The Court also noted that consent to act as a trustee signed by Andrew Aravanis and Ronil Prakash Roy had been filed with the Court under s 156 of the Act. On 20 December 2022, Mr Riley filed in this Court an Application for Review of Registrar Ditton's orders on 29 November 2022.
APPLICATION FOR ADJOURNMENT
This morning, Mr Shohmelian who appears on behalf of Mr Riley, sought an application for an adjournment. The basis for that application was that Mr Riley was seeking representation who had speciality in bankruptcy matters and that he had not been able to achieve that. The Court noted that Mr Shohmelian appeared for him this morning. There is no criticism of Mr Shohmelian. He has done his very best in the circumstances noting the difficult position that Mr Riley is in.
Mr Riley further relied upon the reason that he was in the middle of an appeal in the Supreme Court against the respondent in relation to the judgment debt and he was seeking to have the debt decreased by over $50,000, in his estimation. Mr Shohmelian agreed that even if he was completely successful within the Supreme Court proceedings, the amount of the judgment debt would not be reduced to the minimum or below the minimum that is set for a sequestration order to be made. In those circumstances, noting the objection of Ms Jones' representatives, the application for an adjournment was refused.
MR RILEY’S EVIDENCE
In terms of Mr Riley in the substantive application, to set aside the sequestration order he relies on two Affidavits dated 20 December 2022 and 9 March 2023. In his first Affidavit, Mr Riley deposes that on or around September 2022 he developed significant back pain that he said rendered him bedridden for a number of months. He claims not to be able to work since September 2022 due to these injuries. He claims that the pain medication he has been on is such that he has been unable to deal with everyday matters, has not been able to attend the matter in relation to the bankruptcy proceedings. He states he did make a goodwill payment of $20,000 to Ms Jones which has been acknowledged and a receipt was attached in that amount from the solicitors acting for Ms Jones.
In his second Affidavit, Mr Riley deposes there were difficulties with his solicitors due to their workload in filing relevant appeal documentation against the judgment debt of the Supreme Court of New South Wales. The Court attaches little weight to that claim. Attached to his second Affidavit is a copy of a summons issued by the Supreme Court of New South Wales filed on 9 March 2023 seeking time for a summons commencing and the appeal to be extended together with an order granting leave to appeal the judgment and orders of Judge Abadee on 12 September 2022.
Mr Riley seeks that the order of the default judgment be reduced by $46,150, being 50 per cent of the amount of the principle sum advanced to him of $92,300 or such other order as the Court considers appropriate. Attached to his Affidavit are a number of medical reports. The first is dated 16 September 2022, is a referral to a Dr Michael Briggs. The referral is for medical imaging and it states that Mr Riley has experienced two episodes in the last few months of disabling pain in the lower back. An imaging report confirmed dislocation, small central disc protrusion at L5-S1. No significant lumbar canal or foraminal stenosis was noted.
In an Affidavit dated 15 May 2023, Mr Riley asked the Court to adjourn the matter of the hearing from 16 May 2023. First, he claims that he is seeking legal representation, as noted earlier, and he indicated he would probably need three to four months to engage new solicitors. He also noted that the proceedings were underway and a timetable had been put in place. The Court notes that no submissions were filed by Mr Riley in support of the application in terms of the substantive application for the setting aside of the sequestration order. Again, the Court makes no criticism of Mr Shohmelian in relation to that, noting what has been put in the Affidavits by Mr Riley.
MS JONES' EVIDENCE:
In her affidavit of 5 May 2023, Ms Jones takes issues with a number of the claims made by Mr Riley. She states that although claiming to be suffering from excruciating back pain and bedridden for a number of months, she attaches a printout from Fitness First gym showing Mr Riley has attended there on a regular basis, including 56 times from 13 September 2022. She also notes that the medication which is recorded as being taken by him in his referral from medical imaging does not relate to back pain or other pain, but other conditions. There are also attached to the Affidavit two photographs of Mr Riley's fiancée in December 2022 and January 2023 and Mr Riley appears not to be suffering from debilitating pain such that he is bedridden.
In terms of those matters, they are of interest from a passing point of view, but they actually have no bearing on the matters here before the Court. The Court is not here to determine the credit of Mr Riley. It is here to determine whether or not a sequestration order should have been made.
CONSIDERATION
A review of a Registrar's sequestration order is a de novo hearing. Accordingly, the Court needs to be satisfied that the various matters listed in s 52(1) of the Act are satisfied. They are 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 the purpose for the Court may accept an affidavit verifying the petition is sufficient);
b)service of the petition; and
c)the fact that the debt or debts which the creditor relies upon are still owing.
The Court is satisfied that the Creditor's Petition was indeed served. The Court is satisfied that the matters contained within the petition are correct and it is also satisfied, noting the concessions made by Mr Shohmelian, that the debt is still outstanding in the full amount of the judgment debt, less $20,000 which has been paid.
Section 52(1) of the Act goes on to say that “if (the Court is) satisfied with the proof of those matters, (the Court) may make a sequestration order against the estate of the debtor.” The Court is satisfied of the matters contained within the creditor's petition. It is also satisfied that it is properly served.
While the Court notes that action has been taken in the Supreme Court for a review of the debt, on Mr Riley's own admissions, even if successful, the debt remaining will still be in excess of the statutory minimum required for a sequestration order to be made. Further, it is not a matter for this Court to go behind what is a lawfully made order of the District Court in the circumstances of this case.
In Katter v Melhem (No 2) [2014] FCA 1176 at [77], Wigney J of the Federal Court said the following:
Fourth, the Court should not go behind a judgment where the grounds upon which the judgment is challenged are such that, if accepted, they would only support a finding that the amount of the debt be reduced and would not support a finding that there was, in truth, no debt at all
His Honour makes reference there to a number of decisions, which include Emerson v Wreckair Pty Ltd (1992) 33 FCR 581, Olivieri v Stafford (1989) 24 FCR 413, Re Cosimo Longo Ex parte: Cosimo Longo [1995]FCA 1324, Cummins v Deputy Commissioner of Taxation (2008) 172 FCR 425 and Re Riviere; Ex parte Original Mont de Piete Ltd (1919) 20 SR (NSW) 77.
Further, as submitted by the solicitor acting for Ms Jones, the trustees that have been appointed for Mr Riley's estate have the capacity and the power to deal with Mr Riley's concerns concerning the outstanding judgment debt. He quotes Tanning Research Laboratories Inc. v O'Brien (1990) 169 CLR 332 in which it was held:
In determining whether or not to admit or reject a proof of debt, a liquidator has been said to act in a quasi-judicial capacity ... according to standards no less than standards of the court or judge.
It was submitted that the above is analogous to the trustees in bankruptcy duties and adjudicating the proof of debt of Ms Jones.
Being satisfied as to all matters required under the Act, the Court confirms the orders made by Registrar Ditton that the estate of Mr Michael Winston Riley sequestrated under the Act. A copy of the judgment order of the Court is to be provided to the Official Receiver within two days. The Court notes the date of commission of the act of bankruptcy remains 4 October 2022 and that there is a consent director's trustee signed by Andrew Aravanis and Ronil Prakash Roy that was filed pursuant to s 156A of the Act.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of Judge D Humphreys. Deputy Associate:
Dated: 16 May 2023
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