FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Maher v Maher [2022] FedCFamC2G 147
File number(s): MLG 892 of 2021 Judgment of: JUDGE SYMONS Date of judgment: 11 March 2022 Catchwords: BANKRUPTCY – Application for review of a sequestration order made by a registrar – whether debtor can pay debts – whether partnership assets can be realised within relatively short time – application dismissed Legislation: Bankruptcy Act 1966 (Cth) ss. 5, 40, 52 Cases cited: Australia & New Zealand Banking Group v Foyster [2000] FCA 400
Bechara v Bates (2021) 388 ALR 414; [2021] FCAFC 34
Deputy Commissioner of Taxation v Cumins (2008) 101 ALD 78; [2008] FCA 353
Edwards & Ors v Attorney-General & Anor (2004) 60 NSWLR 667; [2004] NSWCA 272
Division: Division 2 General Federal Law Number of paragraphs: 38 Date of last submission/s: 21 February 2022 Date of hearing: 21 February 2022 Place: Melbourne Counsel for the Applicants Mr L Hogan Solicitors for the Applicants McNab McNab & Starke Solicitor for the Respondent David Joseph & Co Lawyers Solicitors for the Trustee in Bankruptcy Piper Alderman ORDERS
MLG 892 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF THOMAS CELESTINE MAHER
BETWEEN: DAMIEN MAHER
First Applicant
ROSEMARY MARGARET JOHNSTON
Second Applicant
CHRISTINE BURDEN
Third Applicant
PATRICIA ANNE MAHER
Fourth ApplicantJOHN JOSEPH MAHER
Fifth ApplicantDESMOND FRANCIS MAHER
Sixth ApplicantMICHAEL JAMES MAHER
Seventh ApplicantNATHAN KUPERHOLZ
Supporting CreditorAND: THOMAS CELESTINE MAHER
Respondent
ORDER MADE BY:
JUDGE SYMONS
DATE OF ORDER:
11 MARCH 2022
THE COURT ORDERS THAT:
1.The application for review filed by the respondent on 7 December 2021 is dismissed.
2.The estate of Thomas Celestine Maher be sequestrated under the Bankruptcy Act 1966 (Cth).
3.The applicants’ costs of the review proceeding be fixed in the sum of $8,251.21 and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
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
JUDGE SYMONS
INTRODUCTION
This is an application for review of a sequestration and related costs order made by a registrar of this Court on 16 November 2021 against the estate of Thomas Celestine Maher (“Mr Maher”).
Mr Maher (through his legal representative) filed an application for review and an accompanying affidavit on 7 and 8 December 2021, respectively. The application for review, which by its nature, requires the prosecution (or, re-prosecution) by the applicant creditors of their petition, was heard by the Court on 21 February 2022 after…
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- Maher v Maher [2022] FedCFamC2G 147
- Case
- [2022] FedCFamC2G 147
- Decision Date
CaseChat Overview and Summary
The key legal issue was whether the respondent was solvent and able to meet his financial obligations. This required an analysis of the respondent’s assets and their liquidity. The respondent’s significant debts and the obstacles in liquidating his partnership assets, coupled with the lack of evidence regarding the timeframe for such liquidation, posed substantial challenges. The court had to assess if these circumstances rendered the respondent unable to pay his debts within a reasonable time.
In reaching its decision, the court found that the respondent’s current debts alone exceeded $750,000 and that there were no indications of how or when these debts could be settled. The respondent’s inability to liquidate his interest in the partnership without the consent of other partners, which had historically been withheld, further complicated the matter. The court concluded that the respondent could not demonstrate the ability to pay his debts within a reasonable timeframe, thereby satisfying the criteria for insolvency under the Bankruptcy Act.
The court ultimately found that the conditions for sequestration were met, leading to the respondent’s estate being declared bankrupt. The court ordered the respondent's estate to be sequestrated, recognizing the respondent’s insolvency based on the inability to meet his financial obligations.
Orders
Orders of the court
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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
The applicant creditors submit that the respondent’s present debts are significant (circa $700,000) and he has further contingent debts arising from Court orders that are awaiting only assessment and that there is the prospect of further debts accruing in respect of the future court hearings. The submit, having regard to the difficulties that inhere in the Maher partnership around the obtaining of consent and there being no evidence before the Court of any steps being taken to have the partnership wound up or any indication as to how long this process (if commenced) might take to conclude, the Court cannot be satisfied on any measure that the respondent is solvent.CONSIDERATION Although the applicant creditors invite the Court to evaluate the question of the respondent’s solvency against a level of indebtedness that includes a combination of present, contingent and prospective debts, the matter can be determined by proceeding on the basis that at the very least, the respondent has present (certain) debts in the amount of approximately $750,000. This reflects the submissions made by the respondent at the hearing of the review application and the material (including the proofs of debt) that are before the Court. For reasons that will become apparent, I have found it unnecessary to resolve the question of the level (if any) of the respondent’s indebtedness that might arise from claims that are best characterised as contingent and/or prospective. The question of whether the respondent is able to pay his debts is not answered simply by reference to a balance sheet analysis. Instead, as this case perfectly illustrates, the inquiry must take account of the nature of the identified assets and the ability of the respondent to convert those assets into cash within a relatively short time. The difficulty for the respondent is that, on his own case, he will not be in a position to pay all of his debts unless he is able to liquidate some at least of his interest in the Maher partnership. Historically, the respondent has not been able to achieve this result, including, it would seem, because the Partnership Deed requires the respondent to obtain the consent of the other partners to do so and because that consent has not been forthcoming. While there may be mechanisms available to the respondent to force a sale, including through the dissolution of the Maher partnership, there is presently no evidence before the Court as to how, and, critically, across what timeframes, such a process might occur. There is presently no evidence before the Court as to whether, in the event that such process was to take place, the assets of the Maher partnership would be amenable to realisation, either through their sale or a form of pledge or mortgage. The Court is unable in these circumstances to make any rational projection as to when (if ever) the respondent might be in a position to pay his debts. It follows that the respondent has not satisfied me that he is able to pay his debts for the purpose of s 52(2)(a) of the Bankruptcy Act. That being the case, and having regard to my findings in relation to s 52(1), the conditions for the sequestration of the respondent’s estate are fulfilled.