Moloney v DUARTE
[2014] FCCA 1068
•19 May 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MOLONEY v DUARTE | [2014] FCCA 1068 |
| Catchwords: BANKRUPTCY – Creditors petition – where petition under s.40(1)(b)(iii) of the Bankruptcy Act – whether petitioning creditor required to prove insolvency of debtor – where respondent’s notice of opposition did not plead solvency – whether to adjourn to allow for amendment to notice of opposition – whether to make an order under s.50 of the Bankruptcy Act placing the debtor’s property in the control of a trustee prior to the hearing. |
| Legislation: Bankruptcy Act 1966 (Cth) ss.40(1)(b)(iii), 50 |
| Reynolds v Aluma-Lite Products Pty Ltd (No. 2) [2010] FCA 914 |
| Applicant: | ANNABELLE ELIZABETH MOLONEY |
| Respondent: | CHARMAINE DUARTE |
| File Number: | SYG 934 of 2014 |
| Judgment of: | Judge Raphael |
| Hearing date: | 19 May 2014 |
| Date of Last Submission: | 19 May 2014 |
| Delivered at: | Sydney |
| Delivered on: | 19 May 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr O Jones |
| Solicitors for the Applicant: | Cormino Prassas |
| Counsel for the Respondent: | Ms Y Guo |
ORDERS
Matter adjourned into registrar’s list on 2 June.
Respondent to file and serve any amended notice of grounds of opposition by 26 May together with an affidavit in support.
Respondent to pay applicant’s costs of today.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 934 of 2014
| ANNABELLE ELIZABETH MOLONEY |
Applicant
And
| CHARMAINE DUARTE |
Respondent
REASONS FOR JUDGMENT
This matter was called on for hearing of the petition brought by the applicant, Ms Moloney against the respondent, Ms Duarte. Ms Moloney is not the original creditor. She is an assignee. There appears to be a significant history between the original creditor and Ms Duarte. The petition itself raises not the usual claim that the respondent has failed to comply with a bankruptcy notice but a claim under s.40(1)(b)(iii) of the Bankruptcy Act 1966 (Cth)[1] that the debtor has made a payment that would, if she became bankrupt, be void against the trustee. The payments in question being three payments to a barrister who was employed by the respondent in certain Land and Environment Court proceedings.
[1] The Act.
The respondent herself argues that this ground of petition cannot succeed because the allegation that the payments were made for no consideration is not sustainable. She argues that the payments were made pursuant to an agreement from the primary creditor for payment by instalments of these legal costs and that the payment to the barrister was part of that arrangement.
It did not fall to the Court to hear that ground of opposition because some way into the hearing, but at a stage before any evidence was called, the respondent sought leave to amend her notice of opposition to include a claim that she was solvent. The circumstances in which this occurred were that the debtor had been advised that the nature of the act of bankruptcy was such that it carried with it an obligation on the part of the petitioning creditor to prove insolvency on the part of the debtor.
Whilst, at first sight, there are some attractions to this argument, the creditor, through her counsel, provided the respondent debtor with details of a decision on appeal from this Court by Logan J in Reynolds v Aluma-Lite Products Pty Ltd (No. 2) [2010] FCA 914 where at [50] his Honour, considering a similar but not identical subsection of s.40, said:
“It was put on behalf of Mr and Mrs Reynolds that it was necessary to construe the act of bankruptcy specified in s 40(1)(d)(i) of the Bankruptcy Act as carrying with it an obligation on the part of the petitioning creditor to prove insolvency on the part of the debtor because a quality of insolvency was present in each of the other acts of bankruptcy specified in s 40(1). I reject this submission. In the first instance, it adds a gloss to the specified act of bankruptcy which neither context nor purpose dictates. This is impermissible. Secondly, that it has proved necessary to sell a debtor’s property after it has been seized under a warrant of execution does logically raise a concern about that debtor’s ability to pay the debt concerned and perhaps others. It does not follow from the commission of this act of bankruptcy that the estate of the debtor must be sequestrated. It is open for the debtor on the hearing of the petition to prove that he or she can pay his or her debts. Indeed, it would be a bold creditor who, in the face of the prior provision of such evidence, either filed or further prosecuted a petition relying on this particular act of bankruptcy. All other things being equal and if an ability to pay debts were then proved by the debtor, so to do might expose the creditor to an adverse costs order, perhaps on an indemnity basis.”
The respondent has not provided the Court with any authority that would indicate that a different situation would apply in respect of an alleged act of bankruptcy under 40(1)(b)(iii) and this Court is of the view that the reasoning of his Honour must bind it.
However, because the question of solvency was clearly in the air, the Court indicated to the respondent that it would be prepared to grant an adjournment of this matter so that an amendment to the notice of opposition could be made and evidence filed. The applicant, not unreasonably, objected to this, but the Court believes that it is in the interests of justice that the respondent have such an opportunity.
The applicant also asked that an order be made under s.50 of the Act placing the debtor’s property in the control of a trustee prior to the hearing, but the Court is of the view that the respondent, having raised a prima facie case which, if successful, would cause the petition to be dismissed, should not accede to such a request at this time.
As the matter stands, although the case is to some extent “part-heard”, no oral evidence has been called, and given that I will be retiring from this Court on 1 July 2014, it will be impossible for me to hear the matter and determine it with any certainty prior to that time. For that reason, I propose to adjourn the matter on the following basis. Matter adjourned into Registrar’s list on 2 June 2014. Respondent to file and serve any amended notice of grounds of opposition by 26 May 2014 together with an affidavit in support. Respondent to pay applicant’s costs of today.
I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Judge Raphael
Associate:
Date: 26 May 2014
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