FEDERAL COURT OF AUSTRALIA
Li v Wu [2020] FCA 776
File number: ACD 84 of 2019 Judge: GRIFFITHS J Date of judgment: 9 June 2020 Catchwords: BANKRUPTCY AND INSOLVENCY – creditor’s petition seeking sequestration order under s 43 of the Bankruptcy Act 1966 (Cth) (Act) against the estate of the respondent – petition opposed on the basis of an asserted offsetting claim under s 52(2) of the Act – whether the respondent could demonstrate “other sufficient cause” why a sequestration order ought not to be made for the purposes of s 52(2)(b) - respondent’s estate sequestrated under the Act Legislation: Bankruptcy Act 1966 (Cth), ss 40(1)(g), 43, 52(1), 52(2)
Court Procedure Rules 2006 (ACT), r 76
Federal Court (Bankruptcy Rules) 2016 (Cth), r 4.06
Cases cited: Baker v Perpetual Trustee Company Limited [2012] FCA 553
International Alpaca Management Pty Ltd v Ensor [1999] FCA 72
Ling v Enrobook Pty Ltd [1997] FCA 226; 74 FCR 19
Mann v Paterson Constructions [2019] HCA 32
Wu v Li [2018] ACTSC 224
Qun Xiong (Kenny) Yu v Todaytech Distribution Pty Ltd [2006] FCA 131
Rigg v Baker [2006] FCAFC 179; 155 FCR 531
Date of hearing: Determined on the papers Date of last submissions: 13 May 2020 Registry: Australian Capital Territory Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 111 Solicitor for the Applicant: WMG Legal Pty Ltd Solicitor for the Respondent: McInnes Wilson Lawyers ORDERS
ACD 84 of 2019 BETWEEN: MR YU XIN LI
Applicant
AND: MR TAO WU
Respondent
JUDGE:
GRIFFITHS J
DATE OF ORDER:
9 JUNE 2020
THE COURT ORDERS THAT:
1.The estate of Tao Wu be sequestrated under s 43(1) of the Bankruptcy Act 1966 (Cth).
2.The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GRIFFITHS J:
Introduction
The applicant (Mr Li) filed a creditor’s petition on 7 November 2019. He seeks a sequestration order under s 43 of the Bankruptcy Act 1966 (Cth) against the estate of the respondent (Mr Wu). The judgment debt underlying the bankruptcy notice (BN226119) arose from ongoing litigation between the parties, which dates back to 2012. Mr Wu opposes the petition on the basis of an asserted offsetting claim under s 52(2) of the Bankruptcy Act.
The lengthy history of litigation between…
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- Li v Wu [2020] FCA 776
- Case
- [2020] FCA 776
- Decision Date
CaseChat Overview and Summary
The court considered the complex history of litigation between the parties, including Wu's involvement in business dealings with Mr Li and Ms Chen, and the eventual collapse of the Golden Constructions Group. The court noted that Wu had failed to establish any compelling reason to deny the sequestration order beyond his ability to pay the debt, which alone was not sufficient to prevent the order under the statute. The court concluded that the creditor's petition should be granted, and the respondent's estate should be sequestrated.
Consequently, the court ordered the estate of Tao Wu to be sequestrated under section 43(1) of the Bankruptcy Act 1966 (Cth). Additionally, the court ruled that Mr Li's costs should be taxed and paid from Wu's estate in accordance with the Act. These orders were made to ensure that the creditor's rights were upheld and that the legal process was followed correctly.
Orders
Orders of the court
1. The estate of Tao Wu be sequestrated under s 43(1) of the Bankruptcy Act 1966 (Cth).
2. The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with 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
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
It is desirable to set out ss 43 and 52(1) and (2) of the Bankruptcy Act:43 Jurisdiction to make sequestration orders(1) Subject to this Act, where:(a)a debtor has committed an act of bankruptcy; and(b)at the time when the act of bankruptcy was committed, the debtor:(i)was personally present or ordinarily resident in Australia;(ii)had a dwelling house or place of business in Australia;(iii)was carrying on business in Australia, either personally or by means of an agent or manager; or(iv)was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.(2)Upon the making of a sequestration order against the estate of a debtor, the debtor becomes a bankrupt, and continues to be a bankrupt until:(a)he or she is discharged by force of subsection 149(1); or(b)his or her bankruptcy is annulled by force of subsection 74(1) or 153A(1) or under section 153B.…52Proceedings and order on creditor’s petition(1) At the hearing of a creditor’s petition, the Court shall require proof of:(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);(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;and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. …(2)If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:(a)that he or she is able to pay his or her debts; or(b)that for other sufficient cause a sequestration order ought not to be made;it may dismiss the petition.…(b) The litigation history The history of litigation involving the parties is somewhat convoluted. At the risk of some repetition, it may assist to outline that history, drawing heavily on the description provided by the Court of Appeal in Li v Wu [2019] ACTCA 14. The proceeding in the ACTSC by which Mr Wu sought leave to commence a derivative proceeding in the name of Golden Constructions arises out of a series of business dealings between Mr Wu, Golden Constructions, Mr Li and Ms Chen. Mr Li and Ms Chen are Chinese citizens who wished to immigrate to Australia. They entered into a business relationship with Mr Wu and several companies which had been incorporated by him. This included Mr Li lending money to at least one of those companies. The Golden Constructions Group collapsed in August 2011. Mr Li brought proceedings against Mr Wu in the FCA and obtained a judgment on 6 November 2013 in his favour in the amount of $976,866.80 plus interest (Li v Wu[2013] FCA 1067). There was an appeal by Mr Wu and a cross-appeal by Mr Li. On 6 December 2013, Mr Li issued a bankruptcy notice to Mr Wu based upon the judgment debt and the time for compliance with it was successfully extended pending judgment upon the appeal and cross-appeal.