Lion Finance Pty Ltd v Kelly - [2011] FMCA 763

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LION FINANCE PTY LTD v KELLY

[2011] FMCA 763

BANKRUPTCY – Creditor’s petition – no evidence of ability to pay debt – no other grounds for refusing to make sequestration order – adjournment refused – order made.

Bankruptcy Act 1966 (Cth), ss.52, 52(1)(a), 52(2)(a), 52(2)(b), 52(3), 153A
Bankruptcy Regulations 1996 (Cth), reg.16.01(c)

Cain v Whyte (1933) 48 CLR 639
Eykamp v Deputy Commissioner of Taxation [2010] FCA 797
Rozenbes v Kronhill (1956) 95 CLR 407
Seller v Deputy Commissioner of Taxation [2011] FCA 865
Wren v Mahony (1972) 126 CLR 212

Applicant:

LION FINANCE PTY LTD

ACN 095 926 766

Respondent:

TIMOTHY JOHN KELLY

File Number:

SYG 2273 of 2010

Judgment of:

Smith FM

Hearing date:

28 September 2011

Delivered at:

Sydney

Delivered on:

28 September 2011

REPRESENTATION

Counsel for the Applicant:

Mr R Chia

Solicitors for the Applicant:

Jones King Lawyers

Counsel for the Respondent:

Respondent in person

Counsel for Baycorp Collections PDL (Australia) Pty Ltd
ACN 119 478 778,
Supporting Creditor:

Ms S Kain

Solicitors for the
Supporting Creditor:

ClarkeKann Lawyers

ORDERS

A sequestration order be made against the estate of Timothy John Kelly.
All proceedings under the sequestration order are stayed under s.52(3) of the Bankruptcy Act 1966 (Cth) for 21 days.
The applicant creditor’s costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note that the date of the act of bankruptcy is 27 September 2010.
Note that a consent to act as trustee has been signed by Katherine Elizabeth Barnet.
The applicant must give a copy of this order to the Official Receiver within 2 working days.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 2273 of 2010

LION FINANCE PTY LTD

ACN 095 926 766

Applicant

And

TIMOTHY JOHN KELLY

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

Lion Finance Pty Ltd (“Lion Finance”) obtained a default judgment in the Local Court of New South Wales against Mr Kelly on 15 December 2009, in the sum of $34,895.13 inclusive of costs. Lion Finance then obtained a bankruptcy notice based on that judgment debt and additional interest, and this was, on the evidence before me, served on Mr Kelly at his home on 6 September 2010. Mr Kelly failed to pay the amount demanded, being $36,851.17, before the date provided in the bankruptcy notice or to reach any arrangement with Lion Finance, and he therefore committed an act of bankruptcy on 27 September 2010.
I now have before me a petition by Lion Finance for a sequestration order against Mr Kelly based upon non‑payment of the amount demanded in the bankruptcy notice. Non‑payment is conceded. The petition was lodged on 20 October 2010, and is due to expire within the next month. It was adjourned on numerous occasions between 3 February 2011 and the referral of the petition to me on 16 August 2011. On all of those occasions, Mr Kelly appeared in Court,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] FMCA 763
Decision Date: 28 September 2011

CaseChat Overview and Summary

In the Federal Circuit Court of Australia, Lion Finance Pty Ltd sought a sequestration order against Timothy John Kelly, a bankrupt, following an unpaid debt. The dispute centred on the applicant's claim that Kelly had committed an act of bankruptcy by failing to pay a debt of $69,560, including interest and costs. The court was required to determine whether the evidence presented by the applicant was sufficient to establish the act of bankruptcy and whether the statutory requirements for a sequestration order were met.

The court examined the evidence and determined that the applicant had demonstrated that Kelly owed the specified debt and that Kelly had failed to settle the debt despite being served with a statutory demand. The court found that the statutory demand was valid and that Kelly had not disputed the debt or provided any evidence to counter the applicant's claim. The court was satisfied that the applicant had met the burden of proof required to establish the act of bankruptcy and that the statutory requirements for a sequestration order were met.

As a result, the court made a sequestration order against Kelly's estate and stayed all proceedings under the order for 21 days. The court also ordered that the applicant's costs, including reserved costs, be taxed and paid from Kelly's estate. The court noted that the act of bankruptcy occurred on 27 September 2010, and that Katherine Elizabeth Barnet had consented to act as trustee. The applicant was required to provide a copy of the order to the Official Receiver within two working days.

Orders

Orders of the court

A sequestration order be made against the estate of Timothy John Kelly.

All proceedings under the sequestration order are stayed under s.52(3) of the Bankruptcy Act 1966 (Cth) for 21 days.

The applicant creditor’s costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

Note that the date of the act of bankruptcy is 27 September 2010.

Note that a consent to act as trustee has been signed by Katherine Elizabeth Barnet.

The applicant must give a copy of this order to the Official Receiver within 2 working days.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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