Khalifeh v Wenberg
[2008] FMCA 103
•22 January 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KHALIFEH v WENBERG | [2008] FMCA 103 |
| BANKRUPTCY – Bankruptcy Notice – where agreement made as to method of satisfying Supreme Court judgment from proceeds of sale of property – where property cannot be sold – whether order for payment can be isolated from notation of agreement on method of payment – whether debtor has a cross claim – whether judgment can be enforced – whether notice should be set aside. |
| Bankruptcy Act 1966, ss.40(1))g), 41(7) |
Wiltshire Smith v Mellor Olsson (1995) 57 FCR 572
| Applicant: | CHRISTIAN KHALIFEH |
| Respondent: | GEORGINA BLACK MILNE DUTCH MERCER BREWSTER WENBERG |
| File Number: | SYG 45 of 2008 |
| Judgment of: | Raphael FM |
| Hearing date: | 22 January 2008 |
| Date of Last Submission: | 22 January 2008 |
| Delivered at: | Sydney |
| Delivered on: | 22 January 2008 |
REPRESENTATION
| For the Applicant: | In person |
| Solicitors for the Respondent: | Reimer Winter Williamson Laywers |
ORDERS
Bankruptcy notice number NN5144 2007 be set aside.
The respondent pay the applicant's costs limited to the court fees upon issuance of the application together with the sum of $50.00 representing Mr Khalifeh's out of pocket expenses in relation to the issue of the proceedings and attendance at this hearing.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 45 of 2008
| CHRISTIAN KHALIFEH |
Applicant
And
| GEORGINA BLACK MILNE DUTCH MERCER BREWSTER WENBERG |
Respondent
REASONS FOR JUDGMENT
There comes before an application by the alleged debtor to set aside a bankruptcy notice numbered NN5144/07 issued by the Official Receiver on 24 December 2007. The bankruptcy notice claims that the applicant debtor owes the respondent creditor the sum of $37,500, plus interest, pursuant to a judgment of the Supreme Court of New South Wales made on 6 April 2006 but only entered on 6 April 2007.
I am informed by the parties that the judgment was one entered by consent following a mediation of a dispute over the estate of Wayne Wenberg and in particular surrounding the ownership of a property known as 43 Madison Crescent, St Claire which is registered under folio identifier 1127/262976.
The judgment therefore represented an agreement between the parties. It made declarations and orders and contained notations dealing with that agreement. The declaration was that the first plaintiff in the proceedings, the alleged debtor, is the beneficial owner of 50 per cent of the realty at 43 Madison Crescent. That property I am informed, is currently held in the name of the respondent even though the applicant now has a 50 per cent equitable interest.
The relevant order of the court is found in paragraph 3 of the document. It gives judgment for the defendant against the first plaintiff in the sum of $37,500. In paragraphs 8 and 9 the Court notes:
“[8]The agreement of all parties who have signed this minute that the defendant will proceed to sell the realty and from the proceeds to pay all necessary costs and disbursements in respect of the sale and any Capital Gains Tax liability; one half of the balance shall be paid to the Estate of Wayne Wenberg, the other half shall be paid to the first plaintiff less an amount of $37,500.00 which will be paid to the said Estate.
[9] The agreement of all parties who have signed this minute the payment of $37,500.00 as noted in 8 herein will upon payment discharge the first plaintiff's liability under order 3.”
The respondent to these proceedings and defendant in the Supreme Court proceedings now seeks to enforce the order of the Supreme Court. She argues that paragraph 3 of the judgment stands separately and aside from the notations, paragraphs 8 and 9, and that she is entitled to receive the $37,500.00 notwithstanding that the property has not been sold.
I am informed that the property has not been sold because following some further proceedings in the Supreme Court an agreement was made between the parties that one Margaret Andrews was entitled to continue to reside rent free in the property provided she continues to pay council and water rates levied on the property and all other current and recurring household expenses. Order 2 of the agreed short minutes of order states:
“An order that Georgina Black Milne Dutch Mercer Brewster Wenberg be restrained from interfering with Margaret Adam's right to continue to reside in the said premises.”
The applicant argues that the agreements made, which were formalised in the two judgments to which I have referred, provide a scheme for the settlement of the dispute pursuant to which any money owed by Mr Khalifeh to Ms Wenberg is to be satisfied from the sale of the property and that until the sale of the property is completed the judgment is not an enforceable one for the purposes of the Bankruptcy Act 1966 (the “Act”).
He would also argue that in any event, as the equitable owner of the property, he has a set off against the legal owner of the property in respect of the value of one half of the property which equals or exceeds the sum of $37,500.00 and thus the bankruptcy notice should be set aside pursuant to the provisions of s.40(1)(g) and s.41(7) of the Act.
Mr Williamson, who appears on behalf of the respondent creditor, informs me that his client wishes to enforce the judgment. But I am of the view that the issuance of a bankruptcy notice in these circumstances is not the appropriate way of dealing with the matter. It appears to me that what has occurred in relation to the agreement incorporated in the first judgment of 6 April 2006 is that the arrangement has been frustrated as a consequence of the second agreement, although it could be argued that by entering into the second arrangement the creditor has been party to the acts which would constitute the frustration and would therefore not be entitled to take any steps to seek further orders from the Supreme Court based upon it.
I am of the view that making a finding that the bankruptcy notice remains valid would be to fly in the face of the agreement made between the parties concerning the manner in which payment of this debt is to be made. The debt is not one that can presently be enforced because the parties have agreed to a method of payment that cannot yet be put into effect. If the judgment cannot be enforced it cannot be the subject of a valid bankruptcy notice; Wiltshire Smith v Mellor Olsson (1995) 57 FCR 572.
I order that the Bankruptcy notice number NN5144 2007 be set aside. The respondent pay the applicant's costs limited to the court fees upon issuance of the application together with the sum of $50.00 representing Mr Khalifeh's out of pocket expenses in relation to the issue of the proceedings and attendance of this hearing.
I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
0
1
1