Mead v Mead (No.2)
[2009] FMCA 1107
•30 November 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MEAD v MEAD (No.2) | [2009] FMCA 1107 |
| BANKRUPTCY – Creditors petition – consideration of grounds of opposition. |
| Bankruptcy Act 1966, ss.40, 52 Civil Procedure Act 2005 (NSW), s.101 Evidence Act 1995 (Cth), s.91 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) Uniform Civil Procedure Rules 2005 (NSW) |
| Mead v Mead [2009] FMCA 637 Yang v Mead [2009] FCA 1202 |
| Applicant: | COLIN ANTHONY MEAD |
| Respondent: | LUCY GUITAR MEAD |
| File Number: | SYG 1713 of 2009 |
| Judgment of: | Driver FM |
| Hearing date: | 11 November 2009 |
| Delivered at: | Sydney |
| Delivered on: | 30 November 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr V Bedrossian |
| Solicitors for the Applicant: | Etheringtons |
The Respondent appeared in person
Solicitors for the Supporting Ms D Funston
Creditor:
ORDERS
The estate of Lucy Guitar Mead is sequestrated.
The petitioning creditors costs, including any reserved costs, are to be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that the date of the act of bankruptcy is 15 July 2009.
The Court notes that a consent to act as trustee has been signed by Mark Julian Robinson and has been lodged with the Official Receiver in Sydney.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1713 of 2009
| COLIN ANTHONY MEAD |
Applicant
And
| LUCY GUITAR MEAD |
Respondent
REASONS FOR JUDGMENT
Introduction and background
The petitioning creditor is the former husband of the respondent debtor. They have been engaged in protracted (and expensive) litigation in the Family Court of Australia since 1996. In the course of interim property proceedings in 2001 his Honour Cohen J made a costs order against Ms Mead to be payable within a fixed period[1]. The costs were taxed in the Family Court in the sum of $100,143.09. The certificate of taxation was filed in the District Court of New South Wales on 24 April 2002. A bankruptcy notice was issued on 6 March 2008 asserting a debt of $154,267 which included interest of $54,123.91 claimed pursuant to s.101 of the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW). The amount claimed in the creditors petition is $167,535.27, which includes interest of $67,392.18 accrued up to 16 July 2009.
[1] The orders were amended under the slip rule on 28 November 2003 by his Honour to correct the date of his judgment.
The petition and evidence
The petition is supported by the affidavit contained within it, as well as the affidavit of service of Michael Lim made on 25 August 2009, the affidavit of debt of Paul Martin Etherington made on 10 November 2009 and the affidavit of search of Michael Lim made on the same day. I also received the affidavit of Paul Martin Etherington made on 6 November 2009 detailing the outcome of final property proceedings between the parties in the Family Court and proceedings in the Supreme Court of NSW also involving the parties. As a result of those proceedings, the debtor has incurred substantial additional liabilities to the creditor. Ms Mead has appealed to the Full Court of the Family Court against the judgment of O’Ryan J. That appeal has not yet been determined.
Ms Mead challenged the bankruptcy notice issued to her in earlier proceedings in this Court[2]. The application was dismissed with costs. Ms Mead unsuccessfully appealed against that judgment to the Federal Court of Australia[3].
[2] Mead v Mead [2009] FMCA 637
[3] Yang v Mead [2009] FCA 1202
I am satisfied that, subject to consideration of the grounds of opposition to the creditors petition advanced by Ms Mead, there has been sufficient compliance with the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) and the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) for the making of a sequestration order against her estate.
Grounds of opposition
Ms Mead relies on a Notice of Grounds of Opposition filed on 12 August 2009 which sets out the following grounds:
1. On 29 July 2009 Notice of Appeal No. NSD 775/2009 was filed in the Federal Court of Australia, the appeal has been listed for a direction hearing on 24 August 2009 to set aside Her Honour Barnes FM Judgment dated 15 July 2009.
2. Applicant husband’s evidence in chief in the Family Court proceeding SYG 3359 of 1997, there was a Bankruptcy Notice NN 1871/03 in his volume 5-113/123 that I was not served with any unpaid invoice alleged bill of costs causing an undated and unchallenged Certificate of taxation was issued in the Family Court of Australia, there was no proceeding in the District Court No. 2682 of 2002 called upon me to raise in the proceeding to counter claim, set off or cross demand, of which the bankruptcy notice NN 1871/03 was issued arising out of the default judgment on about 24 April 2002.
3. On about 6 March 2008 Bankruptcy notice NN0765/08 served on me did not come with invoices alleged debt that I owed where my family had assisted me to file an application SYG 671/2008 on 20 March 2008 since I was mistakenly framed to serve a 6-month jail sentence between 11 January 2008 and 11 July 2008 in Emu Plains Corrective Centre by renewal mortgage property being one of the guarantors paid to applicant husband’s debts to the Commonwealth Bank since 30 October 1996.
4. Applicant husband and Etheringtons solicitors double jeopardised by issuing two (2) Bankruptcy notice NN1871/03 and Bankruptcy notice NN0765/08 that they had their purpose in wrong reasons to mislead natural justice in this Honourable Court as well as in the Family Court of Australia where NN0765/08 may result in the Bankruptcy Notice being invalid.
5. On 25 May 2009 applicant husband and Etheringtons solicitors pressed His Honour Barry J to determine another contravention application that they brought against me in June 2008 prior to I was released from Emu Plains Corrective Centre that I am grateful His Honour Barry J had adjourned the punish hearing on 16-17 July 1009 because it’s obvious that two third of final trial I was not able to defend myself before the trial judge in the Family Court proceeding SYF 3359 of 1997 where I had in time finalized my grounds of appeal and filed my Amended Notice of Ground Appeal No. EA 51 of 2009 in the Appeal Registry Easter Region of the Family Court of Australia on 15 June 2009 to explain what the Mead case was about.
6. On 29 May 2009 knowingly in the morning a proceeding was to lift injunction to HITS company’s bank accounts that the applicant husband and Etheringtons solicitors frozen since 3 April 2009 was listed before the trial judge in the Family Court of Australia, I was also in the middle of preparing my Amended Grounds of Appeal in the Full Court of the Family Court of Australia to be filed within time before 15 June 2009, yet the husband applicant and Etheringtons solicitors refused to postpone proceeding SYG 671/2008 before Her Honour Barnes FM in the afternoon in this Honourable Court.
7. According to the Bankruptcy Act 1966 Sect 35A subsection (2A) the Federal Magistrates Court may, on the application of a party to the proceeding or on its own initiative, transfer the proceeding SYG1713 of 2009 to the Family Court pending the resolution of Appeal Proceeding No. EA 51 of 2009 in the Full Court of the Family Court of Australia.
Ground 1 has been overtaken by the appeal judgment of the Federal Court in relation to the bankruptcy notice. I note that on 19 November 2009 Ms Mead applied for special leave to appeal to the High Court against the Federal Court’s judgment. However, in my view, nothing new is raised in that application. Ground 7 was not pressed, although Ms Mead submits that the existence of the outstanding appeal in the Full Court of the Family Court provides another reason for this Court not to make a sequestration order.
Ms Mead also relies upon a supplementary Notice of Grounds of Opposition filed on 31 August 2009 which sets out the following grounds:
1. That the creditor ex husband misuse of the Act since 2003 by claiming a default judgment out of an unchallenged cost from a solvent ex wife by issuing Bankruptcy Notice NN1871/03 on 30 July 2003 and Bankruptcy Notice NN0765/08 on 6 March 2008 which is tampered and is over six (6) years old.
2. That the Bankruptcy Notice NN1871/03 or Bankruptcy Notice NN0765/08 was to put pressure on solvent respondent debtor rather than to genuinely invoke the Court’s bankruptcy jurisdiction, where the default judgment for cost did not express recoverable forthwith is not recoverable until the conclusion of the proceedings in the Appeal Proceeding No. EA 51 of 2009 of the Family Court of Australia as well as in the proceeding of SC 1933 of 2001 in the Supreme Court of New South Wales.
3. That the matrimonial property and companies assets were frozen since 7 September 1999 on the application of the applicant creditor in Proceeding No. SYF 3359 of 1997 in the Family Court of Australia where the respondent debtor’s interest still exist at the time of this creditor’s petition was filed to be an abuse of process.
Ms Mead relies upon her own affidavits made on 12 August 2009 and 28 October 2009. She also tendered a number of documents relating to the various proceedings between her, her former husband and others.
The manner in which the (original and supplementary) two Notices of Grounds of Opposition are set out is somewhat discursive. To the extent that Ms Mead relies upon invalidity in the bankruptcy notice issued to her, however, I am bound by the judgment of Flick J on appeal from this Court. In that judgment at [16]-[28] his Honour found:
The bankruptcy notice served upon Ms Mead was issued on 6 March 2008 and states that Ms Mead owes Mr Mead a debt of $154,267. This sum is founded upon a certificate of taxation in respect to the Family Court proceedings in the sum of $100,143.09 together with interest of $54,123.91. Before this Court, Ms Mead sought to contend that the bankruptcy notice should be set aside because:
* the notice was said to have been issued to “Victor Michael Dominello” as the “creditor” rather than Mr Colin Mead or, alternatively, because the capacity in which the bankruptcy notice had been issued was uncertain;
* the certificate of taxation was said to have been improperly issued, it being erroneously based upon a judgment given on 18 October 2001, whereas there was no such judgment; and
* the notice required Ms Mead to pay the amount claimed or to make an arrangement for payment “within 21 days” in circumstances where she was then in custody and unable to comply with such a demand.
None of these contentions should succeed.
On its face, the bankruptcy notice was relevantly completed as follows:
The person who applied for this notice to be issued is:
Victor Michael Dominello
who confirms by the following signature that he or she is the creditor/the creditor’s authorised agent:
(signature appears)
The signature, it was accepted, was that of Mr Dominello. It is neither correct to contend that Mr Dominello was identified as the creditor nor that uncertainty was created by the failure to “cross-out” the phrase “the creditor” so that his capacity as the “authorised agent” was unambiguous. The bankruptcy notice had previously unambiguously identified “Colin Mead” as “the creditor”. It is not considered that these matters were relevantly “capable of misleading” Ms Mead.
Next, the certificate of taxation as issued under the seal of the Family Court correctly identified the amount of the judgment and the interest then payable. A costs order may constitute a “final order” for the purposes of s 40(1)(g): Goldberg v Morrow [2005] FCA 1038 at [19] per Crennan J. The order upon which the bankruptcy notice was here issued is considered to be a “final order”. A submission that the certificate of taxation had been fraudulently or improperly obtained is without substance. The factual foundation for the attack upon the certificate focussed upon the date of judgment. No date of judgment is set forth in the certificate itself. An order subsequently made on 28 November 2003 by the Family Court, however, corrected under the “slip rule” the date of judgment from 18 October 2001 to 2 November 2001. But that correction, it is considered, does not vitiate the bankruptcy notice. Again, there was nothing on the face of the bankruptcy notice which was “capable of misleading” Ms Mead.
Finally, the fact that Ms Mead was in custody when the bankruptcy notice was served does not relieve her of the obligation to comply with the terms of the notice “within 21 days”. And, in any event, she in fact commenced proceedings in the Federal Magistrates Court within that period: [2009] FMCA 637 at [3].
The challenge to the validity of the bankruptcy notice served upon Ms Mead is thus rejected.
Before the Federal Magistrate Ms Mead claimed that she had a “counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt” within the meaning of and for the purposes of s 40(1)(g) of the Bankruptcy Act. The application to set aside the bankruptcy notice as filed in the Federal Magistrates Court claimed this “counter-claim, set-off or cross demand” in the following terms:
1. ...
2. ...
3. Cross claim husband breached marriage contract, I singly looked after children 12 years.
4. Set aside & cross claim husband money I put in $446848 Annexure D prior to marriage to purchase Ermington home.
5. Set aside & cross claim husband money I put in $445059 Annexure D by selling Ryde unit at 1/3 Hatton Street Ryde 2112 and others.
The reasons for decision of the Federal Magistrate address both:
* two “claims” referred to in the application — namely, one for $446,848 and the other for $445,059;
and
* an application that an order be made that, as the Federal Magistrate described it, “Mr Mead and his solicitors pay her $892,907 and be reported ‘to the law society and bar association to refrain their wrongful and unethical actions’”. The sum of $892,907 was said to be the total of $446,848 and $445,059. The total does not correspond.
The sum of $446,848 was said to consist of an amount of $60,000 allegedly owed to Ms Mead since 15 September 1982 and interest. The $60,000 was said to be the contribution she had made in 1982 in connection with the purchase of a former matrimonial home. The sum of $445,059 was comprised of a sum of $126,838.73 (claimed to have been contributed to the marriage on 26 April 1994 through a company called Hypec Electronics Pty Ltd) together with interest.
The Magistrate dealt with these claims (in part) as follows:
[13] Insofar as the application is based on the ground that Mrs Mead has a counter-claim, set-off or cross demand within s.40(1)(g) of the Bankruptcy Act, neither in her affidavit nor elsewhere in the material before the Court did she set out the details required by Rule 3.02(2) of the Federal Magistrates Court (Bankruptcy) Rules. I gave her the opportunity in oral submissions to clarify the basis for her application. However her submissions did not satisfy me that she had a counter-claim, set-off or cross demand within s.40(1)(g) of the Act.
..
[16] The evidence before the Court and the submissions of Mrs Mead do not identify any cause of action against Mr Mead or claim against Mr Mead, beyond her claims that she made contributions to the marriage, that should be permitted to be heard and determined in the usual way. Her claims about contributions to the marriage have been considered and determined by the Family Court. Indeed, insofar as Mrs Mead raises issues that were the subject of determination in the Family Court proceedings, her application to set aside the bankruptcy notice was adjourned until determination of those proceedings. Final orders have now been made by the Family Court. Hence, if there was such a claim that was not statute barred that was a material claim, it has been dealt with by the Family Court.
The Notice of Appeal as filed in this Court by Ms Mead identifies some 12 purported “Grounds of Appeal” which largely are not directed to the identification of any error said to have been committed by the Federal Magistrate. Many of the purported “Grounds of Appeal” refer to conduct said to have taken place in either the proceedings between Ms Mead and her former husband in the Family Court of Australia or in proceedings in the Equity Division of the Supreme Court of New South Wales. The only “Ground of Appeal” which is directed to the decision of the Federal Magistrate is the following (without alteration):
1. On the hearing date of 29 May 2009 before Her Honorable Federal Magistrate Barnes, my Amended Notice of Grounds Appeal had not been settled to submit to give weight of counter-claim, set off and cross claim, where the Husband refuse to adjourn SYG671/2008 proceeding until further order or determination of the Amended Appeal of EA 51 of 2009 is heard by the Full Court of the Family Court of the Australia.
Before this Court Affidavits of Ms Mead and Ms Yang were relied upon together with 12 additional exhibits. Such was the entirety of the factual basis upon which the Appellants wished to pursue their appeals and the relief sought in the two Notices of Motion and the two Interim Applications. No objection was taken to this Court considering that additional material, other than an objection as to relevance. At least part of the relief thus sought in the two Motions — namely leave to “file further evidence” — was thereby achieved.
But no error can be discerned in either the reasons for decision of the Federal Magistrate or by reference to the additional material now relied upon. Notwithstanding the manner in which the “Grounds of Appeal” have been expressed, each has nevertheless been considered with a view to determining whether it can in any way throw light on either the manner in which the Federal Magistrate approached her task or whether Ms Mead has any “counter-claim, set-off or cross demand” which has not hitherto been addressed. But no error can be thereby discerned and no “counter-claim, set-off or cross demand” has been identified.
Notwithstanding the additional materials now relied upon, there is no reason to question the conclusion as reached by the Federal Magistrate in respect to either the claim for $446,848 or $445,059.
Finally, the application as filed in the Federal Magistrates Court asserted both claims for these two sums and a further claim that Ms Mead expressed obliquely as “and others”. Whether or not this was a claim pursued before the Federal Magistrate, it was submitted in this Court that there was an additional claim Ms Mead had as a “counter-claim” against Mr Mead. The claim was quantified in the sum of $327,860. The claim was a claim founded upon the costs of raising the children of the marriage. There is no substance to this final way in which Ms Mead seeks to advance her appeal. Such evidence as was sought to be relied upon had no relationship to the costs incurred in raising the Mead children.
No state of satisfaction can be reached for the purposes of s40(1)(g) of the Bankruptcy Act that Ms Mead has any “counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt”.
In my view, that judgment provides a complete answer to grounds 1, 2 and 3 in the original Notice of Grounds of Opposition and also grounds 1 and 2 of the supplementary Notice of Grounds of Opposition. My view is unaltered by Ms Mead’s recent application for special leave to appeal to the High Court, which simply repeats issues already dealt with by this Court and the Federal Court.
Ground 4 in the first Notice of Grounds of Opposition asserts “double jeopardy” in that the bankruptcy notice relied upon is the second bankruptcy notice issued to Ms Mead in relation to the judgment debt. However, the petitioning creditor does not rely upon any asserted act of bankruptcy arising from the first bankruptcy notice and only relies upon the act of bankruptcy arising from the second bankruptcy notice served on 6 March 2008 and requiring compliance on or before 15 July 2009. The reason why the first bankruptcy notice was not relied upon and why the time for compliance with the second bankruptcy notice was lengthy is explicable by reference to the property proceedings between the parties in the Family Court (which have now been resolved subject to the outstanding appeal) and the challenge to the bankruptcy notice brought in this Court.
Grounds 5, 6 and 7 of the first Notice of Grounds of Opposition are related and, as I understand it, are advanced in support of the proposition that the extant appeal proceeding in the Family Court provides a reason for this Court not to make a sequestration order. The judgment in the District Court arising out of the taxed costs of the Family Court in the earlier interim property proceedings is unaffected by either the final property judgment of the Family Court or the appeal against it. There has been no challenge to the judgment of the District Court. I understand, however, that Ms Mead asserts that, although she is not currently solvent, if she is successful in the Family Court appeal (and in other proceedings in the Supreme Court of NSW) she may obtain funds to pay the debt. The orders made by O’Ryan J in the Family Court, which are subject to appeal, are unusual in that effectively 100 per cent of the tangible matrimonial assets were awarded to the petitioning creditor. The orders are comprehensively explained in his Honour’s judgment of 568 pages in which he made findings of dishonesty against Ms Mead. His Honour also referred the papers for consideration of criminal proceedings against her.
In the earlier proceedings in this Court concerning the bankruptcy notice, Barnes FM said at [17]-[20]:
Mrs Mead referred to the fact that she had filed a notice of appeal in the Family Court and that some of the orders made by O'Ryan J had been stayed. The orders made by O'Ryan J on 3 April 2009 were extensive. Among other things, Mrs Mead was ordered to transfer to Mr Mead her interest in the former matrimonial home at Ermington, all her legal and beneficial interest in the issued capital of Hypec (subject to Mr Mead paying to her a percentage of any surplus available to be distributed on conclusion of the winding up of the company that exceeded $2 million) and the entirety of her legal and beneficial interest in the issued capital of a company called Quoin Island Resort Developments Pty Ltd. She was also ordered to pay to Mr Mead the sum of $3,360,000 and do all acts and things necessary to ensure that moneys held in the trust account of his solicitors be released to him and to transfer any shares she held in publicly listed companies to him. Mrs Mead and three members of her family were ordered to indemnify Mr Mead against all claims arising in relation to his interest in the former matrimonial home and in various companies or as a result of any guarantees given by him in relation to those companies or any alleged indebtedness on his part to any of those companies.
After Mrs Mead lodged the notice of appeal certain of the orders made on 3 April 2009 were stayed. Mrs Mead submitted that as the operation of the orders in relation to transferring her interest in the family home at Ermington and payment of the sum of $3,360,000 to Mr Mead had been stayed, if the family home was sold she could theoretically pay the debt to Mr Mead that formed the basis for the bankruptcy notice. Mrs Mead also suggested that there might be a surplus available for distribution after the winding up of Hypec of which she would receive a percentage. She made this submission notwithstanding that in addition to staying the operation of the order in relation to transfer of the family home (until further order or determination of the appeal), O’Ryan J ordered that Mrs Mead be restrained from in any way dealing with the Ermington property or doing any act to cause any caveat lodged on the title by Mr Mead to be removed or lapse and also imposed restrictions on transactions by Hypec except in the ordinary course of business.
In a judgment of 18 May 2009 (a copy of which was tendered by the respondent) O'Ryan J dealt with the application for a stay by Mrs Mead and other respondents. I have had regard to s.91 of the Evidence Act 1995 (Cth). However this evidence establishes the terms of the judgment and its effect. His Honour found that the balance of convenience favoured a dismissal of the applications for a stay (at [41]). Despite this, being mindful that Mrs Mead was unrepresented and at that time still had the opportunity to file (without leave) an amended notice of appeal articulating appealable error, O’Ryan J granted a stay of the orders in relation to the Ermington property in which Mrs Mead and the children resided and the order for payment to Mr Mead of $3,360,000 (as well as limiting the order restraining transactions by Hypec). He did so on the basis that Mr Mead could apply to discharge or vary the orders in the event that Mrs Mead failed to file an amended notice of appeal or to provide any meritorious grounds of appeal in any amended notice of appeal. O’Ryan J was not prepared to grant a stay on the operation of other orders, finding that the balance of convenience favoured Mr Mead obtaining some benefit from the judgment of 3 April 2009.
Insofar as Mrs Mead’s submissions might be taken to be an application for a further adjournment of these proceedings in light of her appeal to the Full Court of the Family Court, I am not persuaded that an adjournment would be in the interests of justice or the parties or that the existence of the notice of appeal provides a basis on which the bankruptcy notice should be set aside. No submissions were made by Mrs Mead in relation to the grounds of appeal. She has not established that she has any prospects of success on the evidence before this Court.
The position has not changed. I also note that on 18 May 2009 O’Ryan J ordered Ms Mead to pay $1,576,182 to Hypec Electronics Pty Ltd (in liquidation). There is nothing before me to give me any confidence that Ms Mead has a legitimate expectation of being able to pay the debt relied upon by the petitioning creditor within a reasonable time, either based on continuing legal proceedings or otherwise. I am not satisfied that the outstanding appeal in the Full Court of the Family Court provides a reason for this Court to refrain from making a sequestration order.
I also reject the contentions in the second Notice of Grounds of Opposition that the bankruptcy notice was an abuse of process or that the creditors petition is an abuse of process in the light of the ongoing family law proceedings. The restrictions on Ms Mead dealing with property imposed during the course of the family law proceedings related to a demonstrated history of Ms Mead seeking to improperly deal with matrimonial assets and the existence of those orders does not render the present bankruptcy proceeding an abuse of process, nor do they provide a reason for the Court to refrain from making a sequestration order.
I am satisfied that Ms Mead committed the act of bankruptcy alleged in the petition. I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act requires proof. I will make the orders sought in the petition.
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 30 November 2009
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