Mayart Pty Ltd v Knight

Case [2023] FCA 218

FEDERAL COURT OF AUSTRALIA

Mayart Pty Ltd v Knight [2023] FCA 218 

File number(s): VID 182 of 2022
Judgment of: O'BRYAN J
Date of judgment: 15 March 2023
Catchwords: BANKRUPTCY AND INSOLVENCY – creditor’s petition – bankruptcy notice based on failure to pay judgment debt – whether Court should go behind judgment debt – insufficient basis to go behind judgment debt – sequestration order made
Legislation:

Bankruptcy Act 1966 (Cth) ss 5, 40, 43, 44, 47, 52

Federal Court of Australia Act 1976 (Cth), s 35A(7)(b)

Federal Court (Bankruptcy) Rules 2016 (Cth) rr 4.05, 4.06

Property Law Act 1958 (Vic), s 134

Cases cited:

 Doggett v Commonwealth Bank of Australia [2019] FCAFC 19

Cain v Whyte (1933) 48 CLR 639

Knight v Mayart Pty Ltd [2022] VSCA 36

Mayart Pty Ltd v Knight [2020] VCC 1929

Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132

Rozenbes v Kronhill (1956) 95 CLR 407

Simon v Vincent J O’Gorman Pty Ltd [1979] FCA 75; 41 FLR 95
Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 59
Date of hearing: 14 March 2023
Counsel for the Applicant: Dr M Wolff
Solicitor for the Applicant: Noble Lawyers Pty Ltd
Counsel for the Respondent: The Respondent was self-represented

 

ORDERS

VID 182 of 2022
BETWEEN:

MAYART PTY LTD AS TRUSTEE FOR MAYART PROPERTY TRUST (ACN 007 001 176)

Applicant
AND:

MICHAEL KNIGHT

Respondent

ORDER MADE BY:

O'BRYAN J

DATE OF ORDER:

15 MARCH 2023

THE COURT ORDERS THAT:

1.A sequestration order under the Bankruptcy Act 1966 (Cth) (Act) be made against the estate of Michael Knight.

2.The applicant’s costs be taxed and paid from the bankrupt estate of Michael Knight in accordance with the Act.

THE COURT NOTES THAT:

3.The date of bankruptcy is 15 October 2021.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

O’BRYAN J:

INTRODUCTION

  1. On 11 April 2022, the applicant, Mayart Pty Ltd (Mayart) as trustee for the Mayart Property Trust, presented a creditor’s petition seeking a sequestration order against the estate of the respondent, Michael Knight, under s 43 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). Subsequent petitions, in the same terms, were presented on 1 June 2022 and 12 July 2022.

  2. The creditor’s petition is founded upon Mr Knight’s failure to comply, on or before 4.30pm on 15 October 2021, with the requirements of a bankruptcy notice served on him on 4 August 2021 (Bankruptcy Notice) or to satisfy the court that he had a counterclaim, set-off, or cross-demand equal to or more than the sum claimed in the bankruptcy notice, being a counterclaim, set-off, or cross-demand that he could not have set up in the action in which the judgment referred to in the Bankruptcy Notice was obtained.

  3. The Bankruptcy Notice claims the amount of $578,662.68 as owing by virtue of an…

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Mayart Pty Ltd v Knight [2023] FCA 218
Case
[2023] FCA 218
Decision Date

CaseChat Overview and Summary

In the case of Mayart Pty Ltd v Knight, Mayart sought a sequestration order against Michael Knight, based on his failure to comply with a bankruptcy notice served pursuant to a County Court judgment. The case was heard by the Federal Circuit and Family Court of Australia, which ultimately granted the petition and issued a sequestration order against Knight’s estate.

The primary legal issue before the court was whether it should consider the circumstances surrounding the judgment debt on which the bankruptcy notice was based, or whether it should accept the judgment debt as conclusive evidence of the debt. The court found that there was insufficient basis to go behind the judgment debt, and thus accepted the debt as owing.

In reaching its decision, the court considered the statutory framework provided by the Bankruptcy Act 1966, which sets out the process for creditor’s petitions and the conditions under which a sequestration order may be made. The court found that Mayart had satisfied the statutory requirements for proving the matters stated in the petition, serving the petition, and demonstrating that the debt was still owing. The court also noted that Knight had failed to make out any grounds of opposition to the petition.

As a result of the court’s decision, a sequestration order was made against Knight’s estate, and his costs were to be taxed and paid from the bankrupt estate in accordance with the Act. The date of bankruptcy was fixed as 15 October 2021.

Orders

Orders of the court

1. A sequestration order under the Bankruptcy Act 1966 (Cth) (Act) be made against the estate of Michael Knight.

2. The applicant’s costs be taxed and paid from the bankrupt estate of Michael Knight in accordance with the Act.

THE COURT NOTES THAT:

3. The date of bankruptcy is 15 October 2021.

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

Section 52 contains stipulations with respect to the hearing of a creditor’s petition, including the period in which a creditor’s petition remains current. It relevantly provides as follows:(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.…(4)A creditor’s petition lapses at the expiration of:(a)subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or (b) if the Court makes an order under subsection (5) in relation to the petition—the period fixed by the order;unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.(5)The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor’s petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order. EVIDENCE RELIED UPONMayart’s evidence in chief The creditor’s petition of Mayart was verified by an affidavit of the solicitor for Mayart, Darren John Noble, sworn 11 April 2022. By that affidavit, Mr Noble deposed to the following matters:(a)On 2 July 2021, the Official Receiver issued the Bankruptcy Notice (bankruptcy notice 253515). A copy of the Bankruptcy Notice was annexed. The Bankruptcy Notice was based upon the final judgment and orders of Judge Macnamara of the County Court of Victoria made on 19 February 2021 in the County Court proceeding. A copy of the order of the Country Court was annexed.(b)Mr Knight applied for leave to appeal from the judgment and orders of the County Court. On 23 March 2022, the Court of Appeal refused leave to appeal. A copy of the order of the Court of Appeal was annexed.(c)Between 4 and 10 August 2021, Mayart sought to serve the Bankruptcy Notice on Mr Knight by the following methods:(i)by personal service effected at residential addresses notified by Mr Knight in the County Court and Court of Appeal proceedings and a business address appearing on an email sent by Mr Knight;(ii)by post to those same addresses; and(iii)by email to an email address notified by Mr Knight on documents filed in this proceeding and in the County Court and Court of Appeal proceedings.(d)On or about 17 August 2021, Mr Knight applied for orders setting aside the Bankruptcy Notice in Federal Circuit and Family Court of Australia proceeding MLG2095/2021. In that proceeding:(i)Registrar Bird made orders dated 19 August 2021 which, amongst other things, extended the time for compliance with the Bankruptcy Notice to 4:30pm on 16 September 2021;(ii)Registrar Gitsham made orders dated 16 September 2021 which, amongst other things, extended the time for compliance with the Bankruptcy Notice to 4:30pm on 23 September 2021;(iii)Registrar Gitsham made orders dated 23 September 2021 which, amongst other things, extended the time for compliance with the bankruptcy notice to 4:30pm on 7 October 2021;(iv)Registrar Gitsham made orders dated 7 October 2021 which, amongst other things, extended the time for compliance with the bankruptcy notice to 4:30pm on 15 October 2021; and(v)Registrar Gitsham made orders dated 15 October 2021 which dismissed the application.Copies of those orders were annexed.(e)On 11 April 2022, a solicitor employed by Noble Lawyers conducted a search of the records of the Federal Court and Federal Circuit and Family Court (the federal law search) to determine whether any further applications had been made by Mr Knight relative to the Bankruptcy Notice. The federal law search revealed that, as of 11 April 2022, Mr Knight had only been a party to the application to set aside the Bankruptcy Notice (which was dismissed on 15 October 2021) and an inactive proceeding commenced in 2014 by Brighton Grammar School against Mr Knight. A copy of the federal law search was annexed.

Decision

Reasons for decision

Given the state of the evidence, I am unable to make any finding about the validity or purpose of the loan document with Dalle Australia Pty Ltd as lender. It is clear from the County Court judgment that the Mayart loan agreement and contract of sale were tendered in evidence and accepted as valid documents by his Honour. On the evidence before me, there is insufficient reason to doubt the judgment reached by the County Court. That view is strengthened by the fact that Mr Knight abandoned any reliance on his argument under s 134 of the Property Law Act in his application for leave to appeal to the Court of Appeal.CONCLUSION Mr Knight has failed to make out his grounds of opposition. I am satisfied of proof of the matters required by s 52(1) of the Bankruptcy Act. In those circumstances I am satisfied that I should exercise my discretion to make a sequestration order against the estate of Mr Knight.

Ratio Decidendi

Legal Principle Established

The second document was Mr Knight’s written submissions in his application in the Court of Appeal seeking leave to appeal from the County Court judgment. Mayart sought to tender that document to demonstrate that the argument now advanced by Mr Knight in this proceeding had been abandoned by him in the application for leave to appeal. Mr Knight objected to the tender of that document, arguing that he had not had an opportunity to consider its relevance. During the hearing, I informed the parties that I would rule on the tender after hearing argument on the application. I have concluded that the document should be admitted as evidence and it will be marked as exhibit B. It provides a basis for Mayart’s submission that the argument now advanced by Mr Knight in this proceeding had been abandoned by him in the Court of Appeal. I consider that there is no prejudice to Mr Knight from the tender of the document. While Mr Knight complained that he had not been given prior notice of the document before the hearing, the document is Mr Knight’s own written submissions to the Court of Appeal, and Mr Knight was able to respond to the document during the hearing. CONSIDERATION OF PETITIONSatisfaction of the statutory requirements Based on the evidence relied on by Mayart, I am satisfied of the matters set out in ss 43 and 52(1) of the Bankruptcy Act and other related statutory requirements. First, for the purposes of s 43(1)(a), I am satisfied that Mr Knight has committed an act of bankruptcy as described in s 40(1)(g). In that regard, I am satisfied that:(a)Mayart obtained against Mr Knight a final judgment in the County Court proceeding;(b)the Bankruptcy Notice has been served on Mr Knight;(c)Mr Knight has failed to comply with the requirements of the Bankruptcy Notice within the time fixed for compliance which, by orders made in Federal Circuit and Family Court of Australia proceeding MLG2095/2021, was extended to 15 October 2021. Second, for the purposes of s 43(1)(b), I am satisfied that at the time when the act of bankruptcy was committed, Mr Knight was personally present or ordinarily resident in Australia. Third, for the purposes of s 44(1), I am satisfied that the debt exceeds the statutory minimum, the debt is a liquidated sum due at law and the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition. Fourth, for the purposes of s 47(1), I am satisfied that the creditor’s petition is verified by an affidavit of a person who knows the relevant facts, being the affidavit of Mr Noble sworn 11 April 2022. Fifth, for the purposes of s 47(1A), I am satisfied that the creditor’s petition is in the proper form. Sixth, for the purposes of s 52(1), I am satisfied that:(a)the matters stated in the creditor’s petition have been proved by the affidavits relied upon by Mayart in this proceeding;(b)the creditor’s petition has been served on Mr Knight as required by r 4.05 of the Bankruptcy Rules; and (c)subject to the matter considered below, that the debt on which the applicant relies is still owing.