FEDERAL COURT OF AUSTRALIA
Krpina v Arrow Sun Australia Pty Ltd [2015] FCA 63
Citation: Krpina v Arrow Sun Australia Pty Ltd [2015] FCA 63 Appeal from: Krpina v Arrow Sun Australia Pty Ltd & Ors [2014] FCCA 1007 Parties: MIRO KRPINA v ARROW SUN AUSTRALIA PTY LTD (ACN 136 865 408), KENNETH STEWART SELLERS and ALICE FAYE RUHE File number: VID 293 of 2014 Judge: BEACH J Date of judgment: 13 February 2015 Catchwords: BANKRUPTCY – appeal against dismissal of review of sequestration order – various errors alleged in Federal Circuit Court decision – alleged defects in bankruptcy notice and creditor’s petition – alleged solvency – alleged lack of procedural fairness – complaints about conduct of trustees – no error found – appeal dismissed Legislation: Bankruptcy Act 1966 (Cth) ss 41(1)(a), 44(1)(a), 47, 52, 306(1)
Civil Procedure Act 2010 (Vic)
Federal Circuit Court of Australia Act 1999 (Cth) s 104(2)
Federal Circuit Court Rules 2001 (Cth) rr 12.02, 12.03
Federal Court of Australia Act 1976 (Cth) s 25(1AA)(a)
Supreme Court Act 1986 (Vic) ss 33, 58(1)Cases cited: Adams v Lambert (2006) 228 CLR 409
Circle Credit Co Op Ltd v Lilikakis (2000) 99 FCR 592
Sandell v Porter (1966) 115 CLR 666
SZRUR v Minister for Immigration and Border Protection (2013) 216 FCR 445Date of hearing: 15 October 2014 Date of last submissions: 24 October 2014 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 56 Counsel for the Appellant: The Appellant appeared in person Counsel for the First Respondent: Mr P Fary Solicitors for the First Respondent: Macpherson & Kelley Lawyers Counsel for the Second and Third Respondents: The Second and Third Respondent did not appear
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 293 of 2014
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: MIRO KRPINA
AppellantAND: ARROW SUN AUSTRALIA PTY LTD (ACN 136 865 408)
First RespondentKENNETH STEWART SELLERS
Second RespondentALICE FAYE RUHE
Third Respondent
JUDGE:
BEACH J
DATE OF ORDER:
13 FEBRUARY 2015
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The appeal is dismissed.
2.The respondents’ costs of and incidental to the appeal be treated as costs and expenses in the administration of the appellant’s estate pursuant to s 109(1)(a) of the Bankruptcy Act 1966 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 293 of 2014
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: MIRO KRPINA
AppellantAND: ARROW SUN AUSTRALIA PTY LTD (ACN 136 865 408)
First RespondentKENNETH STEWART SELLERS
Second RespondentALICE FAYE RUHE
Third Respondent
JUDGE:
BEACH J
DATE:
13 FEBRUARY 2015
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
The appellant is a bankrupt, with his estate being the subject of a sequestration order made on 6 August 2013 by Registrar Caporale. The sequestration order was made on a creditor’s petition filed 1 July 2013 by the…
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Details
- Case
- [2015] FCA 63
- Decision Date
CaseChat Overview and Summary
The appeal in Krpina v Arrow Sun Australia Pty Ltd was brought by the appellant, Krpina, against the decision of the Federal Circuit Court to dismiss his application for review of a sequestration order. The sequestration order had been made on the basis of a bankruptcy notice issued by Arrow Sun, the respondent and petitioning creditor, which cited the appellant's failure to comply with the notice as the act of bankruptcy. The appellant contested the validity of the bankruptcy notice and the underlying debt, and argued that he was solvent. The appellant also raised procedural fairness concerns and criticisms of the conduct of the trustees. The primary issue for the court was whether the Federal Circuit Court had erred in dismissing the appellant's application for review.
The court found no merit in the appellant's arguments concerning the validity of the bankruptcy notice and the underlying debt. The court held that the appellant's complaints about the default judgment did not provide a basis for setting it aside, particularly as the appellant had not challenged the judgment in a timely manner. The court further noted that the amount of the judgment debt met the statutory requirements for a bankruptcy notice and creditor's petition. Regarding solvency, the court found that the appellant had not discharged the onus of proving that he was solvent. The court also dismissed the appellant's claims of procedural unfairness and misfeasance by the trustees.
The appeal was dismissed by the court, which found no error in the decision of the Federal Circuit Court. The court ordered that the respondents' costs of and incidental to the appeal be treated as costs and expenses in the administration of the appellant's estate.
The court found no merit in the appellant's arguments concerning the validity of the bankruptcy notice and the underlying debt. The court held that the appellant's complaints about the default judgment did not provide a basis for setting it aside, particularly as the appellant had not challenged the judgment in a timely manner. The court further noted that the amount of the judgment debt met the statutory requirements for a bankruptcy notice and creditor's petition. Regarding solvency, the court found that the appellant had not discharged the onus of proving that he was solvent. The court also dismissed the appellant's claims of procedural unfairness and misfeasance by the trustees.
The appeal was dismissed by the court, which found no error in the decision of the Federal Circuit Court. The court ordered that the respondents' costs of and incidental to the appeal be treated as costs and expenses in the administration of the appellant's estate.
Orders
Orders of the court
1. The appeal is dismissed.
2. The respondents’ costs of and incidental to the appeal be treated as costs and expenses in the administration of the appellant’s estate pursuant to s 109(1)(a) of the Bankruptcy Act 1966 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
I have reviewed the careful reasons of her Honour and do not detect any error of the type asserted by the appellant. The appeal will be dismissed.BACKGROUND On 6 August 2012, Arrow Sun obtained a default judgment in the Magistrates’ Court of Victoria in the sum of $5,648.61 against the appellant (judgment debt). The sum of $5,648.61 consisted of the principal underlying debt of $4,371.52, interest of $468.61 from 8 May 2012 to the filing of the complaint, interest of $116.96 from the filing of the complaint to judgment, and legal costs of $691.52. On 7 November 2012, Arrow Sun issued a bankruptcy notice based on the judgment debt. The bankruptcy notice was served on 7 January 2013. On 29 January 2013, the appellant filed an application in the Magistrates’ Court to set aside the default judgment and seeking a rehearing. The appellant did not appear on that application and it was struck out. On 29 January 2013, the appellant also filed an application to set aside the bankruptcy notice, but this ultimately did not proceed; its sub‑stratum, ie the application in the Magistrates’ Court to set aside the default judgment, failed. As I have said, on 1 July 2013, Arrow Sun presented its creditor’s petition in the Federal Circuit Court, claiming that the appellant owed it $5,789.59, being the judgment debt plus post judgment interest of $140.98. The available act of bankruptcy asserted was non‑compliance with the bankruptcy notice. The sequestration order was made on 6 August 2013 by Registrar Caporale and the second and third respondents were appointed trustees of the appellant’s estate. There was no stay of any proceedings under the sequestration order. On 26 August 2013, the appellant’s application for review was filed in the Federal Circuit Court. During the period of October 2013 to March 2014, various interlocutory steps including the setting and vacation of hearing dates occurred (see her Honour’s reasons at [10] to [14]). Ultimately, the application for review was heard on 5 March 2014. The appellant was self-represented at all times. At the hearing on 5 March 2014, various affidavits were read, including affidavits of the appellant sworn on 26 August, 8 October, 24 October and 11 December 2013 (this last affidavit has a typed date on its face of 10 October 2013 and also an apparently incorrect reference to 11 October 2013) and affidavits of Arrow Sun’s solicitor, Thiam‑Jin Chu sworn 9 and 29 October and 12 December 2013. At the hearing on 5 March 2014, each of the deponents was cross‑examined. Much of the appellant’s case was addressed to the solvency question (s 52(2)) including the assertion that the then appellant’s financial state had somehow been produced by misfeasance on the part of the trustees. As there had been no stay of any proceedings under the sequestration order, from 6 August 2013 the trustees had taken steps to deal with the appellant’s estate in accordance with the requirements of the Bankruptcy Act 1966 (Cth) (the Act).
Evidence
Evidence Before The Court
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Decision
Reasons for decision
It is appropriate to turn to the grounds of appeal. A. Default judgment/debt of petitioning creditor Many complaints are made concerning the default judgment. Such complaints are then used as the springboard to attack the validity of the bankruptcy notice. Such complaints are also used to challenge whether the $5,000 or more condition in s 41(1)(a) or s 44(1)(a) of the Act was satisfied; it is to be noted that although there is reference to the same dollar amount, the conditions are different concepts; one is dealing with a final judgment or order; the other is dealing with the debt owing at the time of the presentation of the petition. The appellant’s complaints are set out in grounds 1 to 9 and 29 of his notice of appeal. First, it should be stated that no challenge or attack has been made to the underlying debt of $4,371.52 (see the appellant’s affidavit sworn 24 October 2013 at [8]); grounds 3 and 8 relate more to how the judgment was entered and the judgment debt calculated. It is to be recalled that the default judgment of $5,648.61 consisted of the underlying debt of $4,371.52, statutory interest of $468.61 under s 58(1) of the Supreme Court Act 1986 (Vic) from 8 May 2012 to the filing of the complaint (pre‑complaint interest), interest of $116.96 from the filing of the complaint to judgment (post‑complaint interest) and costs of $691.52, although the interest and costs claims were contested by the appellant. Second, the appellant before her Honour made various attacks in order to endeavour to bring the amount below $5,000. So it was said that the pre‑complaint interest of $468.61 was not claimable, and as a consequence the post‑complaint interest of $116.96 should have been reduced to $104.35. Moreover, it was said that the costs of $691.52 should not have been allowed. This was said to be on the basis that Arrow Sun should have issued proceedings in the Victorian Civil and Administrative Tribunal (VCAT) and that if it had done so, only $450 in costs would have been allowed. If one was to accept all of the appellant’s assertions (and corresponding asserted errors made by her Honour), this would have brought the judgment debt below $5,000 with the bankruptcy notice then being defective. It would also it is said have brought the s 44(1)(a) debt below $5000. Her Honour dealt with the matter at [65] to [70] in the following terms: 65.This issue can be readily disposed of without considering the validity of the amount of interest calculated on the basis of s.58(1) of the SC Act with respect to the interest up to filing of the complaint. If I were to accept the Applicant Debtor’s contention that the debt should only have been the $4,371.32, which he acknowledges he owes and the interest awarded by the Magistrates Court therefore $104.35, the issue of costs would still be against him. The First Respondent was under no obligation to institute the proceedings in VCAT rather than the Magistrates Court and the costs awarded by the Court are not challenged on any other basis. On my calculations that would bring the debt to at least $5,167.19.66.The Court has a discretion to go behind a judgment in proceedings such as these. However, it needs to be considered that the appropriate forum for review of a judgment is the court in which the judgment was issued. The default judgment was made on 6 August 2012. The Applicant Debtor did not seek a re-hearing to set aside that judgment until 29 January 2013, some 22 days after the Bankruptcy Notice was served on him. He then failed to appear at the hearing of his application and his application was struck out with costs. 67.The Applicant Debtor filed an application on 29 January 2013 to set aside the Bankruptcy Notice, on the basis of the re-hearing application but did not proceed with that application. When the First Respondent issued a Creditor’s Petition, he failed to appear on the listed date.68.The Applicant Debtor now seeks to go behind the judgment of the Magistrates Court only to dispute part of the claim for interest. In Emerson and Anor v Wreckair Pty Ltd (1992) [1992] FCA 16; 33 FCR 581, the Full Court of the Federal Court considered the exercise of the Court’s power to go behind a judgment in similar circumstances. The Court said:◦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 ([1992] FCA 16; (1992) 33 FCR 581 at 589).69.I am therefore not satisfied that there is a basis for the Court to go behind the judgment of the Magistrates Court in this case. 70.Further, as the Court noted in that matter, an act of bankruptcy is committed irrespective of whether it can be shown that the underlying judgment is defective. In this case, on the material before me, I am in any event not satisfied that the judgment was defective.
Ratio Decidendi
Legal Principle Established
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