Mockler v Doherty
[2008] FMCA 1404
•26 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MOCKLER v DOHERTY | [2008] FMCA 1404 |
| BANKRUPTCY – Application to vacate a sequestration order made in absence of debtor – consideration of offers made to creditor – where supporting creditor has also issued bankruptcy notice – whether applicant has shown he has reasonable prospects of success upon his Notice of Intention to Oppose. |
| Bankruptcy Act 1966 (Cth), ss.5, 52 |
| McIntosh v Shashoua (1931) 46 CLR 494 International Alpaca Management Ltd v Ensor [1999] FCA 72 Australia & New Zealand Banking Group Ltd v Foyster [2000] FCA 400 Australia & New Zealand Banking Group Ltd v Coutts [2003] FCA 968 |
| Applicant: | DENIS JOSEPH MOCKLER |
| Respondent: | PETER DOHERTY |
| File Number: | SYG 1792 of 2008 |
| Judgment of: | Raphael FM |
| Hearing date: | 26 September 2008 |
| Date of Last Submission: | 26 September 2008 |
| Delivered at: | Sydney |
| Delivered on: | 26 September 2008 |
REPRESENTATION
| Solicitors for the Applicant: | Steward Cuddy & Mockler |
| Respondent in Person |
ORDERS
Application to vacate the order of 23 September 2008 dismissed.
Applicant to pay the respondent's costs which will be added to the costs of the original sequestration order.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1792 of 2008
| DENIS JOSEPH MOCKLER |
Applicant
And
| PETER DOHERTY |
Respondent
REASONS FOR JUDGMENT
On 23 September 2008 there came before me an application for a sequestration order to be made against the estate of Peter Doherty. The bankruptcy petition had previously been before the court on 8 August 2008 when Registrar Segal made orders, including an order that the respondent (the debtor) was to file and serve all affidavit evidence in support of his grounds of opposition by 12 September 2008. The petition and the debtor's interim application filed on 7 August 2008 were adjourned for hearing on 23 September 2008 at 9.45am. The debtor did not file any affidavits as ordered. His notice of objection to the petition indicated two grounds, the first being that the respondent had attempted to pay the debt and the applicant declined to accept payment. The second was that the assets of the respondent exceed the debt claimed.
On 23 September 2008 the creditor applicant appeared for the hearing of the petition. The debtor did not appear. In the absence of the debtor and noting that he had not complied with the orders of Registrar Segal I made a sequestration order.
On 24 September 2008 the debtor contacted my associate and indicated that he had misunderstood the orders of Registrar Segal as to the hearing date and wished to take out an application today for me to vacate the orders which I have made. I agreed that he could do it at noon on 26 September 2008 and he has appeared, as has Mr Mockler, the creditor.
Where a court makes orders in the absence of a party it is always open to it to reconsider those orders and, if necessary, vacate them. A party who wishes the court to do this must establish two things. Firstly, he must provide good reason as to why he did not attend the original hearing, and secondly he should be able to persuade the court that the case he wishes to mount has reasonable prospects of success.
Mr Doherty is a solicitor, although as a result of recent events it appears that his practising certificate has been suspended and his practice is the subject of an order for a manager placed therein by the Law Society of New South Wales. He has been opposing the orders sought by the Law Society in the Supreme Court of New South Wales, and in his affidavit filed on 26 September 2008 indicates that these matters concerning his ability to practice have been going on since at least March of this year with hearings in July and again in the earlier part of this month. Mr Doherty says that these are matters which went to his very livelihood and were therefore considered by him to be of the utmost importance, and I understand that. He indicates that as a result of these proceedings he is under considerable stress, and I understand that as well. He tells me that the mistake in noting the hearing date given by Registrar Segal was an error possibly brought on by the stress of the other proceedings, and I am prepared to accept that.
Where I part company with Mr Doherty is on his grounds of opposition. There is considerable authority to the effect that a creditor is not obliged to accept any offer made by a debtor even where the full amount claimed in a petition is offered: McIntosh v Shashoua (1931) 46 CLR 494; International Alpaca Management Ltd v Ensor [1999] FCA 72 at [43]; Australia & New Zealand Banking Group Ltd v Foyster [2000] FCA 400 at [7]; Australia & New Zealand Banking Group Ltd v Coutts [2003] FCA 968 at [10]. It is to be remembered that a debtor has already committed an act of bankruptcy by the time the petition is heard. If the creditor was to take money offered in that way he may be in very serious risk of a finding that he has received a preference payment. In this particular case no money was actually offered to Mr Mockler by Mr Doherty. What was offered appears to have been an assignment of some debt owed to Mr Doherty in his practice as a solicitor. The person who owed Mr Doherty the money was himself bankrupt and it was not surprising to learn that Mr Mockler declined to accept this proposal.
The second ground related to the fact that Mr Doherty's assets exceeded his liabilities. It is interesting that he puts the matter in this way, rather than relating that he was solvent which, of course, would be a ground under s.52 Bankruptcy Act 1966 (Cth) (“the Act”) for not making a sequestration order.
Section 5 of the Act defines a person as “solvent” if:
“the person is able to pay all the person's debts as and when they become due and payable.”
Mr Doherty has not alleged that he is able to pay his debts as and when they become due and payable. He alleges that he has assets, details of which he provided to me as Annexure A to his affidavit of 26 September 2008. He makes no suggestion as to when those assets could be realised to pay his debts. In fact the assets all consist of real estate, either in Australia or in New Zealand. There is an additional problem with his summary of properties because it is just that: there is no evidence that any of those properties belong one hundred per cent to Mr Doherty or at all.
An additional problem which Mr Doherty faces is that on 7 August 2008 a firm of solicitors Withnall Cavanagh & Co Pty Ltd of Darwin filed an interim application in this court seeking to be added as supporting creditors to the petition presented by Mr Mockler. In the affidavit of Vanessa Farmer dated 5 August 2008 she exhibits a bankruptcy notice issued against Mr Doherty and served on 1 February 2008 indicating a debt of $87,760.09. Given the existence of this documentation Mr Mockler's refusal to accept Mr Doherty's offer is quite understandable.
In the circumstances that I have outlined I am unable to say that if I vacated the orders which I had made and heard the petition today, which is the day that Mr Doherty believed it was going to be heard, I would come to any conclusion other than that to which I have already come, namely that Mr Doherty is an insolvent person and that a sequestration order should be made against his estate. I fully understand that the making of this order has very serious consequences and may well affect Mr Doherty's ability to continue to appeal the unfavourable decisions that have been made against him by the Supreme Court of New South Wales. Given what I know of his financial position I do not believe that granting any further time and vacating the order will be of any assistance to him in reality. The application to vacate the order is therefore dismissed. The applicant must pay the respondent's costs which will be added to the costs of the original sequestration order.
I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 10 October 2008
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