MCB Holdings v Krasnici
[2007] FMCA 37
•29 January 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MCB HOLDINGS PTY LTD v KRASNICI | [2007] FMCA 37 |
| BANKRUPTCY – Creditor’s petition – whether reason to go behind judgment – whether ‘other sufficient cause’ – whether debt. |
| Bankruptcy Act 1966, s.52, 52(1) |
| Wren v Mahony (1972) 126 CLR 212 Corney v Brien (1951) 84 CLR 343 |
| Applicant: | MCB HOLDINGS PTY LTD (ACN 108 218 855) |
| Respondent: | HEIDI MARIA KRASNICI |
| File number: | MLG 1081 of 2006 |
| Judgment of: | McInnis FM |
| Hearing dates: | 11 December 2006 and 16 January 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 29 January 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr P. Fary |
| Solicitors for the Applicant: | White Cleland Pty. |
| Respondent: | In person |
ORDERS
A Sequestration Order be made against the estate of Heidi Maria Krasnici.
The Applicant Creditor's costs be taxed and paid from the estate of the Respondent Debtor, in accordance with the Bankruptcy Act 1966.
The Court notes the date of the act of bankruptcy is 27 July 2006.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1081 of 2006
| MCB HOLDINGS PTY LTD (ACN 108 218 855) |
Applicant
And
| HEIDI MARIA KRASNICI |
Respondent
REASONS FOR JUDGMENT
In these proceedings MCB Holdings Pty Ltd ("the Creditor") by a Creditor's petition filed 29 August 2006 applies for a Sequestration Order against the estate of Heidi Maria Krasnici ("the Debtor").
Apart from relying upon the Creditor's petition, the Creditor also relies upon the usual affidavits verifying the petition and complying with s.52 of the Bankruptcy Act 1966 ("the Act"). Service of the petition is not in issue and an appropriate affidavit of service has been filed.
The affidavit of debt and searches relied upon by the Creditor were before the court at a hearing on 11 December 2006 and at that stage the court did not require the Creditor to provide updated affidavits of debt and searches at the adjourned hearing which occurred on 16 January 2007. Hence, I am satisfied that the relevant proofs have been provided in discharge of the Creditor's obligations under the relevant provisions of the Act.
The petition is opposed by the Debtor, who is self‑represented and relies upon a notice stating grounds of opposition to the application filed on 30 November 2006. The grounds in that notice are:
“1.MCB Holdings Pty Ltd have failed to provide the Respondent with proof of the debt.
2.White Cleland Pty - the solicitors for MCB Holdings - have failed to provide proof of the debt to the Respondent.
3.The Respondent disputes that there is any debt owed to MCB Holdings Pty Ltd.”
The Debtor's notice of opposition is supported by an affidavit sworn by the Debtor on 29 November 2006 ("the Debtor's affidavit").
The Creditor's petition relies upon a Bankruptcy Notice dated 7 June 2006. The Bankruptcy Notice filed by the Creditor claims that the Debtor owes the Creditor a debt of $44,223.17. That amount is calculated according to the schedule annexed to the Bankruptcy Notice as the total of an amount of a judgment, being $43,892.47, together with interest since the date of judgment of $330.70.
The Bankruptcy Notice has attached a certificate of judgment in the County Court of Victoria certifying the total amount of judgment of $43,892.47. In the proceedings in the County Court the Creditor is named as the plaintiff and the Debtor the second defendant. It is noted that the judgment was a default judgment.
There is no dispute in the present case that the Bankruptcy Notice was served upon the Debtor on 18 July 2006. It is also not disputed that the Applicant has not complied with the Bankruptcy Notice and that the date of act of bankruptcy is 27 July 2006.
The default judgment in the County Court was obtained by proceedings commenced by Writ on 20 December 2005 wherein the Creditor as plaintiff claimed loss and damage arising out of a mortgage over land known as 10 Snowy Street, Dandenong North in the State of Victoria ("the land"). In the mortgage dated 24 August 2005 the Creditor is referred to as the mortgagee and the Debtor is one of two mortgagors.
The Grounds of Opposition
Ground 1 - MCB Holdings Pty Ltd have failed to provide the Respondent proof of the debt
The Debtor in her affidavit in support of this ground deposes that the Creditor has failed to "provide me with proof of the debt". The same allegation is made against the Creditors' solicitors. Significantly, however, in the affidavit the Debtor also refers to various requests made for details of the debt.
The Creditor has relied upon an affidavit of Brian Williams, a legal practitioner, sworn 7 December 2006. In his affidavit Mr Williams deposes as follows:
“2.In relation to the assertions made by the respondent in her Affidavit that she is unaware of the break down of the debt giving rise to the judgment upon which the bankruptcy proceedings are founded, I state that at different stages throughout the legal process, the Respondent and her husband have been given details of the amount being claimed by the Applicant.”
Mr Williams in his affidavit then produces a notice to pay served on the Debtor and her husband on 9 December 2005 (Exhibit "BW1"). In that exhibit reference is made to the principal sum advanced by the Creditor to the Debtor and her husband of $70,000 and details are then given in relation to interest payable on a monthly basis on the principal sum. The interest payable was at a rate of 36 per cent per annum and is appropriately calculated at the rate of 3 per cent per month. The notice to pay also sets out costs of default and refers to interest accruing at the daily rate of $69.04 together with costs of discharge of mortgage.
Mr Williams further deposes in his affidavit that the Writ filed in the County Court referred to earlier in this judgment was personally served on the Debtor on 3 January 2006. In support of the application for a default judgment, Mr Williams had also sworn an affidavit on 8 May 2006 in the County Court proceedings which annexed an affidavit of service deposing to service of the Writ upon the Debtor.
In passing, I note the Debtor suggests the Writ was simply left at her place of residence and not properly served; though it should also be noted that as at the date of the hearing no challenge has been made by the Debtor to the default judgment in the County Court based on any inadequate service or indeed any other grounds. For the purpose of this application, I am satisfied there is sufficient evidence of service of the Writ.
In his affidavit Mr Williams further deposes that after service of the Writ on the Debtor a notice of appearance was filed by a solicitor purporting to act on behalf of the Debtor and her husband. However, as no notice of defence was received, Mr Williams deposes that an application was then made for the default judgment.
Mr Williams further deposes that on 11 May 2006 he wrote to the Debtor advising of the judgment details and requesting payment.
It is also significant to note that, in his affidavit sworn 8 May 2006 and filed in the County Court, Mr Williams annexes as an exhibit to that affidavit a statement of account prepared following the sale of the land which demonstrates that the land was sold for an amount of $270,000. From that amount appears to be deducted the usual adjustments and commission, with significant deductions being made to the holders of a first mortgage in the sum of $215,150.00 and an amount of $47,160.53 disbursed to the Creditor.
In support of the default judgment in the County Court, Mr Williams in his affidavit in that court then sets out in some detail the amounts due and payable to the Creditor, commencing with the principal sum of $70,000, to which has been added interest charged pursuant to the mortgage and, after making due allowance, for the amount disbursed on sale of the property, namely $47,160.53.
There is no dispute that the Debtor has received copies of the affidavits relied upon by the Creditor in these proceedings. Service of the relevant documents was verified in an affidavit of service by a process server sworn 11 December 2006 and filed in court.
It is submitted on behalf of the Creditor in relation to the first ground that the Creditor is obliged to furnish the court with proof of the matters set out in the petition, including the allegation that the Debtor owes a Debtor greater than $2,000.00 (s.52(1) of the Act). It was submitted that the Creditor furnished the court with proof of debt, including the annexed judgment to the Bankruptcy Notice and relevant affidavits verifying paragraphs 1, 2 and 3 of the petition and an affidavit of debt. Counsel has submitted that this ground should fail as the Creditor has discharged the obligations it has to provide the appropriate proof of debt.
In my view, the submissions by the Creditor in relation to this ground are correct. The Creditor has discharged the appropriate obligations of a Creditor filing a Creditor's petition; though I am further satisfied, having regard to the content of the affidavit material referred to earlier, that the basis upon which the default judgment was obtained was clearly set out in the Writ issued in the County Court and served upon the Debtor and affidavit material relied upon by the Creditor in the County Court proceedings. Accordingly, this ground should fail.
Ground 2 - White Cleland Pty - the solicitors for MCB Holdings - have failed to provide proof of the debt to the Respondent
I accept, as submitted by the Creditor, that this ground is effectively a repeat of the first ground; and further accept, as submitted, that there is no separate obligation on the legal practitioners for the Creditor to provide the proof required.
I note that the Debtor in her affidavit has referred to inquiries purportedly made of the solicitors for the Creditor seeking further details of the debt to no avail. However, I am satisfied that even if
I accept for present purposes the allegations made by the Debtor of requests for details of the debt, that is not a sufficient basis upon which the court is able to conclude that this ground should succeed.
I otherwise accept the submissions made for and on behalf of the Creditor in relation to this ground, and accordingly this ground should fail.
Ground 3 - The Respondent disputes that there is any debt owed to MCB Holdings Pty Ltd
The Debtor in her affidavit sworn 29 November 2006 states:
“6.I realise that I have failed to comply with the Bankruptcy Notice served on 6th July 2006. …”
The Debtor then refers to personal circumstances, including the care of her son, who she describes as being "mentally ill". The Debtor refers to her belief in relation to the circumstances leading to the execution of the mortgage with the Creditor and that it was arranged in order to refinance the property with a planned sale which she expected would have resulted in a surplus leading to distribution of the balance of sale proceeds to the Debtor and her husband. The Debtor deposes in her affidavit the following:
“7.As far as the claimed debt is concerned, I believe the house was put up as security for the loan and the proceeds of the sale of the loan covered all costs incurred by MCB Holdings. Keith Smith of MCB Holdings took over our two loans in October 2005.
(a) Pepper Home Loans $190,000
(b) Geoffco $50,000
MCB Holdings’ fee for doing so was $10,000 and they were providing this service on the condition that the house was put up for sale. As the house was not sold quickly enough for them, Keith Smith (of MCB Holdings) made arrangements with my estranged husband to get us out of the property. MCB Holdings paid on month’s rent and the bond for a rental property. It was apparently stated that we would receive some money after the sale, ie the balance owed to us after the sale. Correct legal processes were not followed and the house, I believe, was unlawfully seized.
I was not served with a Notice to take Possession by MCB Holdings.”
Rather than denying any indebtedness at all, the Debtor in her affidavit, in my view, seems to challenge the amount now claimed, which of course includes a substantial amount of interest. Based on the mortgage in her affidavit, the Debtor states:
“10.I have obtained a copy of the Transfer of Land Certificate. The house was sold for $270,000 on 25th January 2006. I have no idea how MCB Holdings arrived at the amount of $40,000 plus that they claim I owe them. Even if there was some more interest involved, it couldn’t be anywhere near the $40,000 for such a short period of time.”
Further in the affidavit material the Debtor claims that the Creditor has "arbitrarily inflated the already exorbitant interest costs". The Debtor then refers to telephone conversations and arrangements to pay off the debt.
The Creditor relies upon an affidavit of Keith Avenel Smith sworn 7 December 2006 where the deponent, who is a loans consultant with the Creditor, relevantly states the following:
“3.I refer to paragraph 7 of Krasnici’s Affidavit and state that the Applicant was approached by the Respondent and her husband to assist with the refinancing of their property at 10 Snowy Street Dandenong North as they had fallen into arrears with the then mortgagees, Pepper Home Loans and Geoffco (being the entities referred to in paragraph 7 of Krasnici’s Affidavit.) who has taken a Writ of Possession. Mr. Peter Sangster, finance broker, who has no connection with the Applicant organised for a first mortgage of $200,000.00 which was given in favour of Stephen John Weeks and Wendy Anne Weeks. As there was till a shortfall on the amount owing the Applicant was approached to provide supplementary finance of $70,000 and a second mortgage was provided to the Applicant. Annexed hereto and marked with the letters “KS1” is a copy of the Mortgage of Land signed by the Respondent and dated 24 August 2005. The mortgage clearly indicated the loan principal as being $70,000.00 with an interest rate of 3% per month payable in arrears. Annexed hereto and marked with the letters “KS2” and shown to me at the time of swearing this my Affidavit is copy of the search statement obtained from the Land Titles Office of Victoria as at 20 December 2005 showing the Applicant as a second mortgagee.”
The Creditor submitted that the mere denial of indebtedness by the Debtor is not supported by any cogent evidence filed by the Debtor. It was further submitted that the Debtor has not demonstrated any sufficient basis for the court to exercise its discretion to look behind the judgment obtained in the County Court.
In my view, on a proper reading of the affidavit material of the Debtor together with her submissions, it is clear that the Debtor is concerned that the amount of the judgment obtained by the Creditor in the County Court which now forms the basis of this petition is significantly higher than the amount that she anticipated. The difference between the Debtor's expectation and reality is largely explained by the interest charged pursuant to the mortgage by the Creditor. The Creditor has also chosen to pursue in these proceedings the Debtor and not the Debtor's husband.
Both the significant amount which is now the subject of the debt and the failure to pursue the other Debtor does not provide a basis upon which the court can make a finding that there is in fact no debt. The debt has been established by the appropriate proofs, including the certificate of judgment annexed to the Bankruptcy Notice.
I can see no basis upon which this court should go behind the default judgment. Although the Debtor in oral submissions suggested from the bar table that she expected that inquiries would be made concerning her ability to pay the loan and other matters, there is simply no evidence before the court which would persuade this court that it should go behind the default judgment. The mere expression of concern and perhaps surprise that the sale of the property did not result in the availability of funds of an amount sufficient to extinguish the mortgage does not of itself provide any or any proper basis for the court to go behind the judgment.
I note the principles to be applied in relation to going behind a judgment set out by the High Court in Wren v Mahony (1972) 126 CLR 212 at 225 where the court relevantly states:
“ … The court's discretion in my opinion is a discretion to accept the judgment as satisfactory proof of the debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.”
In the present case I am satisfied that the court does not have sufficient reason not to exercise its discretion to treat the default judgment as satisfactory proof of the debt and nor is there any reason to doubt whether there really is a debt due by the Debtor to the Creditor (see Corney v Brien (1951) 84 CLR 343).
Although some doubt may exist concerning the retainer of no solicitor on record in the County Court for the debtor, the fact remains that no attempt has been made by the debtor to set aside the default judgment on any ground in the Court. The impecuniosity of the debtor does not provide an excuse for failure to at least apply to set aside the default judgment.
It follows for the reasons given that this ground should fail.
Conclusion
I am satisfied that the Creditor has complied with the requirements of s.52 of the Act. I am further satisfied that there is no other issue save for the grounds raised by the Applicant which would provide this court with any reason to refuse to make a Sequestration Order. The grounds raised by the Debtor, as indicated and for the reason given, should fail. Accordingly, the Court makes appropriate orders.
(1)A Sequestration Order be made against the estate of Heidi Maria Krasnici.
(2)The Applicant Creditor's costs be taxed and paid from the estate of the Respondent Debtor, in accordance with the Bankruptcy Act 1966.
The Court notes the date of the act of bankruptcy is 27 July 2006.
I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 29 January 2007
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