Miloni v Bechara

[2019] FCCA 551

FEDERAL CIRCUIT COURT OF AUSTRALIA

MILONI v BECHARA [2019] FCCA 551

Catchwords:
BANKRUPTCY – Creditor’s petition – application for a sequestration order – Court satisfied that an act of bankruptcy occurred – sequestration order made.

Legislation:

Bankruptcy Act 1966 (Cth), ss.47, 52, 53

Federal Circuit Court Rules 2001 (Cth)

Applicant: ANTHONY MILONI

Respondent: BUDDY BECHARA

File Number: SYG 1733 of 2018

Judgment of: Judge Street

Hearing date: 6 March 2019

Date of Last Submission: 6 March 2019

Delivered at: Sydney

Delivered on: 6 March 2019

REPRESENTATION

Solicitors for the Applicant: Mr A Deluchi
ACD Legal

Counsel for the Respondent: Mr J Dooley

Solicitors for the Respondent: Sattouts Legal

ORDERS

1. The Court dispenses with the need for an updated affidavit of search in compliance with the Federal Circuit Court (Bankruptcy) Rules 2016.

2. The Court dispenses with the need for an updated affidavit of debt in compliance with the Federal Circuit Court (Bankruptcy) Rules 2016.

3. A sequestration order is made against the estate of Buddy Bechara.

4. The Petitioning Creditor’s costs be paid out of the bankrupt estate in accordance with the priority to which it is entitled in the sum of $8,000.00.

NOTES

1. The act of bankruptcy occurred on 18 January 2018.

2. A consent to act as trustee was filed on behalf of Jason Lloyd Porter and Joshua-Lee Rob as joint and several trustees.

DATE OF ORDER: 6 March 2019

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1733 of 2018

ANTHONY MILONI

Applicant

And

BUDDY BECHARA

Respondent

REASONS FOR JUDGMENT

1. This is an application for a sequestration order under the Court’s jurisdiction under s 47 of the Bankruptcy Act 1966 (Cth) (“the Act”). The judgment debt in the present case was obtained as a result of a default judgment on 8 September 2015. There was an unsuccessful application by the respondent to set aside the default judgment.

2. The petitioning creditor has read affidavits seeking to establish the service of bankruptcy notice, service of the petition, verification of the petition, and in relation to an earlier affidavit of search and an affidavit of debt. The Court made an order dispensing the need for compliance of the affidavit search. It is apparent on the affidavit evidence that has been filed that there is a dispute in respect of the alleged debt that the respondent seeks to contend, gives rise to circumstances where the Court should go behind the judgment debt. There is no suggestion further payment have been made since the commencement of the proceedings. The Court made an order dispensing of the need for compliance with the Federal Circuit Court Rules 2001 (Cth) in respect of an updated affidavit of debt.

3. The respondent filed a notice stating grounds of opposition, and Mr Dooley of counsel on behalf of the respondent has taken the Court through a carefully prepared structured argument in relation to contentions that the judgment debt was obtained in circumstances where the cause of action was statute barred, and there is no relevant confirmation of the cause of action within the period of the limitation period, and there was no claim for repayment within the six year period. Accordingly, it was submitted the cause of action was extinguished and the respondent contends there is no judgment debt and that this warrants the Court going behind the judgment debt.

4. It is patent on the face of the statement of claim that the debt sought to be recovered was the subject of a deed. The time limit in respect of the deed is 12 years. The Court does not accept the contention advanced in the respondent’s submission that the six year limitation period is a proper basis, in the circumstances of the present case, to warrant going behind the judgment debt. I have also taken into account that the limitation issue was the subject of agitation in the endeavour by the respondent, unsuccessfully, to have the judgment set aside.

5. The second basis for going behind the judgment in the circumstances of the present case is a contention by the respondent that there was payment of the underlying borrowing allegedly the subject of the deed in the sum of $100,000. That proposition is contested by the petitioning creditor. It is apparent on the face of the statement of claim that the petitioning creditor was seeking to pursue funds in respect of the deed.

6. The respondent’s contention that the subject matter of the deed had been repaid is, in substance, an endeavour to go behind the judgment. I am not satisfied in the circumstances of the present case, where there was a contest in respect of the alleged payment of the $100,000 constituting the payment under the deed, that there are proper circumstances to go behind the judgment debt.

7. The next ground raised by Mr Dooley is that the District Court did not have jurisdiction and that there was no act of bankruptcy. The argument turns upon whether the cause of action that was brought was one which was assigned to the commercial division, and Mr Dooley carefully summarised the authorities in relation to that jurisdictional argument, as well as in relation to the authorities concerning what was assigned to the commercial division as opposed to the common law division.

8. Mr Dooley identified the grounds on which he sought to characterise the personal loan the subject of the judgment in the present case as constituting something that should be characterised as a commercial transaction. In particular, Mr Dooley sought to place weight on the background between the parties and other corporate entities. I do not regard that background as supporting the alleged characterisation of the cause of action the subject of the judgment being other than a personal loan cause of action. It was not a commercial transaction.

9. There is no substance in the contention that the District Court did not have jurisdiction. There is no substance in the circumstance of present case that there was no act of bankruptcy. Accordingly, the Court finds that there was an act of bankruptcy that was committed on 18 January 2018. The Court is satisfied that the petitioning creditor has established that there was an act of bankruptcy while the debtor was within the jurisdiction in accordance with s 53 of the Act.

10. The Court is satisfied on the evidence that the requirements under s 52 of the Act are met. There is no case advancing the present case that the debtor is able to pay his debts. The arguments advanced by Mr Dooley were advanced in support of there being other sufficient cause by a sequestration order that would be not be made.

11. For the reasons the Court has given, the Court is not satisfied that it is an appropriate matter to go behind the judgment debt, and the Court finds that there is a debt owing the subject matter of the petition, and the Court is not satisfied that this is a matter where other sufficient cause has been made out why a sequestration order ought not to be made. In the circumstances, the Court is satisfied that the sequestration order should be made.

I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Judge Street

Associate:

Date:  5 April 2019