Morien v Johnston
[2007] FMCA 2100
•17 December 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MORIEN v JOHNSTON | [2007] FMCA 2100 |
| BANKRUPTCY – Review of Registrar’s decision – application to set aside bankruptcy notice – adjournment – invalidity of bankruptcy notice – bankruptcy notice not signed or stamped – bankruptcy notice irregular but not invalid – overstatement – appeal and stay of execution – counter-claim, set off or cross-demand – order for payment of judgment debt not against applicant – not a debtor against whom final judgment obtained – bankruptcy notice set aside. BANKRUPTCY – Application for sequestration order – whether debtor solvent – cash and assets available – no evidence of execution or garnishment – debtor solvent – no sequestration order. |
| Bankruptcy Act 1966 (Cth), ss.5(2); 40(1)(g); 52(2)(a); 306 Bankruptcy Regulations 1996 (Cth) |
| Adams v Lambert (2006) 80 ALJR 679; (2006) 3 ABC(NS) 835; [2006] HCA 10 Australia and New Zealand Banking Group v Foyster [2000] FCA 400 Bank of Australasia v Hill (1907) 4 CLR 1513 Circle Credit Co-op Limited v Lalikakis [2000] FCA 667 Dunn, in the Matter of Dunn v Vangsnes [2000] FCA 1051 International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 Jensen v Queensland Law Society Inc (2006) 5 ABC(NS) 30; [2006] FCA 1206 La Pegna v Deputy Commissioner of Taxation (2006) 204 FLR 364; [2006] FMCA 1643 Mahmoud v The Owners Corporation Strata Plan Bill [No.2] [2006] FMCA 1711 Morien v Johnston [2006] FMCA 1918 Patrick v Wadoon Pty Ltd (No.2) [2007] FMCA 1766 Prudential-Bache Securities (Australia) Limited v Warner [1999] FCA 1143 Re Athans; Ex parte Athans (1991) 29 FCR 302 Re Capel ;Ex parte Caram Finance Australia Limited [1998] FCA 372 Re Sanders; Knudsen and Yates (trading as The Hargreaves Practice) v Sanders (2003) 1 ABC(NS) 408; [2003] FCA 1079 Re Sarina, Ex parte Council of the Shire of Wollondilly (1980) 43 FLR 163 Re O’Sullivan; Ex parte Bank of New Zealand (1991) 30 FCR 112 Sandell v Porter (1966) 115 CLR 666 Sarina v Council of the Shire of Wollondilly (1980) 48 FLR 372 Sidhom v Euphoric Pty Ltd [2006] FMCA 827 Trojan v Corporation of Hindmarsh (1987) 16 FCR 37 Valassis v Bernard [2001] FCA 477 Vaughan v Beritov [2006] FMCA 1294 |
| Applicant: | NEIL EDOUARD MORIEN |
| Respondent: | DERRAN CHARMAINE JOHNSTON |
| File Number: | PEG 286 of 2006 |
| Judgment of: | Lucev FM |
| Hearing dates: | 8, 9, 13 & 15 February 2007 |
| Date of Last Submission: | 15 February 2007 |
| Delivered at: | Perth |
| Delivered on: | 17 December 2007 |
REPRESENTATION
| Applicant: | Mr N E Morien on his own behalf |
| Counsel for the Respondent: | Mr B G Grubb |
| Solicitors for the Respondent: | Arthur Metaxas & Co |
| Applicant: | DERRAN CHARMAINE JOHNSTON |
| Respondent: | NEIL EDOUARD MORIEN |
| File Number: | PEG 273 of 2006 |
| Judgment of: | Lucev FM |
| Hearing dates: | 8, 9, 13 & 15 February 2007 |
| Date of Last Submission: | 15 February 2007 |
| Delivered at: | Perth |
| Delivered on: | 17 December 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr B G Grubb |
| Solicitors for the Applicant: | Arthur Metaxas & Co |
| Respondent: | Mr N E Morien on his own behalf |
ORDERS
The Court makes the following Orders:
In PEG 286 of 2006, the Applicant’s application to set aside the orders and judgment of the Registrar dated 13 October 2006 be upheld as to orders 2 and 3 of those orders, and that orders 2 and 3 be quashed.
In PEG 286 of 2006, that Bankruptcy Notice No. 372 of 2006 be set aside.
In PEG 273 of 2006, that the Applicant’s application for a Creditor’s Petition be dismissed.
In PEG 286 of 2006 that the sum of $85,000 paid into Court by Neil Edouard Morien pursuant to order 1 of this Court’s orders of 9 February 2007, plus any interest earned thereon, be released to him as soon as reasonably practicable.
In PEG 273 of 2006 and PEG 286 of 2006, the parties to confer on costs, and if able to reach agreement a consent order is to be filed reflecting the terms of that agreement, otherwise the question of costs be listed for further directions at 9:45am on 31 January 2008, with liberty to vacate that date if consent orders are filed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 286 of 2006
| NEIL EDOUARD MORIEN |
Applicant
And
| DERRAN CHARMAINE JOHNSTON |
Respondent
PEG 273 of 2006
| DERRAN CHARMAINE JOHNSTON |
Applicant
And
| NEIL EDOUARD MORIEN |
Respondent
REASONS FOR JUDGMENT
(Revised from Transcript)
Introduction
On 30 June 2006 the Principal Registrar of the District Court of Western Australia made orders in action CIV2028 of 2005[1], in which Derran Charmaine Johnston[2] was plaintiff, and Neil Edouard Morien[3] one of the defendants.
[1] “District Court Action”.
[2] “Johnston”.
[3] “Morien”.
Morien has refused to pay $85,000 for which Johnston obtained judgment[4] in the District Court Action.
[4] “Judgment Debt”.
Morien’s refusal to pay the $85,000 caused Johnston to issue a bankruptcy notice[5] against Morien on 13 September 2006.
[5] “Bankruptcy Notice”.
On 6 October 2006 Morien made application to this Court to set aside the Bankruptcy Notice. That application was dismissed by a Registrar of this Court on 13 October 2006.[6]
[6] “Registrar’s Decision”.
Applications
There are two applications before the Court:
a)Morien’s application to set aside and quash the Registrar’s Decision to make orders:
i)refusing an adjournment;
ii)dismissing an application to set aside the Bankruptcy Notice;
iii)that Morien pay Johnston’s costs, including reserved costs; and
b)Johnston’s application for a creditor’s petition.
Issues
There are two primary issues in these proceedings:
a)whether the Bankruptcy Notice ought be set aside; and
b)whether the creditor’s petition ought be dismissed.
Bankruptcy notice
The grounds for seeking review of the Registrar’s Decision, and the quashing of the orders made by the Registrar, are set out in Morien’s Second Support Affidavit,[7] which is in the form of a mix of evidence as to fact, and submissions.
[7] Exhibit A3, Affidavit of Morien, sworn 3 November 2006, paras 24-58. (“Morien’s Second Support Affidavit”).
Adjournment
Morien asserts that the Registrar was wrong to refuse the application for adjournment of the proceedings on 13 October 2006.
The question of whether an adjournment is granted is a matter of discretion, involving an assessment of the grounds for the adjournment and whether or not any prejudice might be suffered by either side if the adjournment is granted or not, case management considerations and the overall justice of the case.[8]
[8] La Pegna v Deputy Commissioner of Taxation (2006) 204 FLR 364 at 369 per Lucev FM; [2006] FMCA 1643 at para. 24 per Lucev FM (“La Pegna”); Mahmoud v The Owners Corporation Strata Plan 811 [No.2] [2006] FMCA 1711 at para. 7 per Lucev FM; Patrick v Wadoon Pty Ltd (No.2) [2007] FMCA 1766 at paras. 16-17 per Lucev FM.
There is nothing in the materials presently before the Court to indicate that sufficient reason was given to the Registrar to warrant Morien’s application for adjournment of the hearing of the application. In any event, even if a short adjournment had been granted, there is no basis on which this Court can conclude that different orders would have then issued.
There is no basis for this Court reviewing the exercise of the Registrar’s discretion to refuse Morien’s application for adjournment.
Invalidity of bankruptcy notice
Failure to sign or stamp
Morien asserts that the bankruptcy notice with which he was served was not signed or stamped by the Official Receiver. It is not necessary to resolve the dispute as to whether it was so signed or stamped (it being Johnston’s case that the bankruptcy notice was signed and stamped when served on Morien).[9]
[9] Morien’s Second Support Affidavit paras. 39-41; Exhibit R2, Affidavit of Jeffery, sworn 6 December 2006, paras 4 and 9; Transcript at 37-38.
Morien placed reliance on this Court’s decision in Vaughan v Beritov.[10] In that case an alteration had been made to the bankruptcy notice after issue and before service without authority of the Official Receiver, by amending the address of the debtor as to the street number only.[11] The Reasons for Judgment in Vaughan make it clear that the petition was dismissed because the bankruptcy notice was invalid as not being the bankruptcy notice issued by the Official Receiver, because it had been subsequently altered.[12]
[10] [2006] FMCA 1294 (“Vaughan”).
[11] Vaughan at para. 7 per Barnes FM.
[12] Vaughan at paras. 12-13 per Barnes FM, following Circle Credit Co-op Limited v Lalikakis [2000] FCA 667.
This case is different. In this case there is no dispute that the bankruptcy notice served on Morien was the same in form as that which was actually issued by the Official Receiver. However, Morien says that because the bankruptcy notice served on him was not stamped and signed it is not the bankruptcy notice issued by the Official Receiver.
In Prudential-Bache Securities (Australia) Limited v Warner[13] the bankruptcy notice was signed but not stamped. In Prudential-Bache the Court found that the deficiency did not cause any substantial injustice, and what had been issued by the Official Receiver had been served upon the debtor, and an act of bankruptcy had been committed on the debtor’s failure to comply with the notice.[14]
[13] [1999] FCA 1143 (“Prudential-Bache”).
[14] Prudential-Bache at paras. 13-15, 17, 19 and 35 per Emmett J.
The matter was further considered in Jensen v Queensland Law Society Inc[15] where the served copy of the bankruptcy notice did not contain an original signature of the creditor or the creditor’s agent. The Federal Court, after referring to Prudential-Bache, held that there was nothing in the Bankruptcy Regulations 1996 (Cth) requiring service of a bankruptcy notice bearing an original signature upon a debtor, and that it could not be suggested that a copy signature would mislead a debtor.[16]
[15] (2006) 5 ABC(NS) 30; [2006] FCA 1206 (“Jensen”).
[16] Jensen at para. 11 per Kiefel J.
The Federal Court in Prudential-Bache and Jensen referred to the earlier judgment of the Federal Court in Re O’Sullivan; Ex parte Bank of New Zealand[17] but did not apply or follow that judgment. Both noted the fact that in O’Sullivan there was a formal concession by the petitioning creditor that authentication was essential to the act of issuance. Seemingly, no such concession was made in Prudential-Bache or Jensen. Nor is such a concession made in this case. In Prudential-Bache the Federal Court held that non-compliance, by failing to stamp the bankruptcy notice, was an irregularity, but not one which caused a substantial injustice so as to invalidate the proceedings.[18] The critical issue was whether or not the debtor had been served with the bankruptcy notice issued by the Official Receiver. There is no dispute in this case that the Bankruptcy Notice was issued by the Official Receiver, and that the copy served on Morien is a copy of the Bankruptcy Notice which issued.
[17](1991) 30 FCR 112 (“O’Sullivan”).
[18] Prudential-Bache at paras. 13-15 per Emmett J.
It is relevant that nothing said by Emmett J in Prudential-Bache was disapproved or criticised by Keifel J in Jensen, and those two relatively recent judgments of the Federal Court, together with the High Court’s decision in Adams v Lambert,[19] have led this Court to conclude that where a bankruptcy notice is one that was issued by the Official Receiver, but the service copy does not bear the Official Receiver’s signature nor stamp, that that is an irregularity not likely to mislead a debtor, and therefore not a basis for invalidation of the Bankruptcy Notice.
[19] (2006) 80 ALJR 679; 3 ABC(NS) 835; [2006] HCA 10.
This Court’s judgment in Vaughan is distinguishable because in Vaughan the bankruptcy notice had been altered subsequent to issuance. Further, in Vaughan it was not necessary for the Court to consider the application of s.306 of the Bankruptcy Act 1966 (Cth).[20] In any event, the Federal Court’s judgment in Jensen, which further clarifies the law in this area, was handed down subsequent to this Court’s judgment in Vaughan (albeit by only one day).
[20] “Bankruptcy Act”; Vaughan at para. 15 per Barnes FM.
In all the circumstances, it appears to the Court that the Bankruptcy Notice issued by the Official Receiver was the Bankruptcy Notice served on Morien, albeit not one bearing the Official Receiver’s signature or stamp. Further, that the failure to serve a signed and stamped copy is an irregularity, but in the circumstances of this case, not one which does substantial injustice to the debtor, nor one which is likely to mislead the debtor as to what is necessary to comply with the notice.[21]
[21] Bankruptcy Act, s.306; Adams v Lambert; Prudential-Bache at paras. 13-15 per Emmett J.
In the circumstances, Morien’s assertion that the Bankruptcy Notice was invalid because it was not in a prescribed form cannot be upheld and does not constitute a reason to quash the Registrar’s Decision.
Overstatement of amount
Morien asserts that the amount of the Judgment Debt has been overstated as $85,000. However, the District Court Orders giving rise to the Judgment Debt specify the amount of $85,000, based on paragraphs in the relevant Statement of Claim alleging misappropriation of $85,000 from Johnston.
As a matter of fact, the assertion that there is an overstatement of the amount of the Judgment Debt is incorrect. As a matter of law the overstatement of the amount is not a reason to set aside the Bankruptcy Notice in any event.[22]
[22] Adams v Lambert ALJR at 686 per Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ; ABC(NS) at 845 per Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ; HCA at para 31 per Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ.
Thus, there is no overstatement of the amount, and even if there were, it would not amount to a reason to quash the Registrar’s Decision.
Appeal and stay of execution in relation to District Court Action CIV 2028 of 2005
There was much dispute in the affidavit evidence in this matter as to whether or not Morien had appealed or sought a stay of execution in relation to the Judgment Debt and what had happened or not happened in relation to those matters.
For present purposes, it suffices to say that the factual position does not appear to have moved far from that determined by this Court in Morien v Johnston[23] where the Court concluded that an appeal had been filed and a stay applied for but not yet obtained, and there was no indication as to when either might be heard or determined. The Court went on to say that beyond that which is usual with the issuance of a bankruptcy notice the applicant had not demonstrated any sufficient prejudice to him as a debtor to warrant an extension of time in which to comply with the bankruptcy notice, and that there was a clear distinction between the issuance of a bankruptcy notice and the hearing of a creditor’s petition, in which the issuance of a sequestration order was not guaranteed.[24]
[23] [2006] FMCA 1918 (“Morien”).
[24] Morien at paras. 24-26 per Lucev FM, citing especially Sidhom v Euphoric Pty Ltd [2006] FMCA 827 at para. 36 per Barnes FM.
In the circumstances, there was not sufficient material before the Registrar, nor necessarily any reason, to set aside the Bankruptcy Notice by reason of any appeal or stay of execution sought from the District Court Orders. That remains the case, on the evidence, presently before the Court. There is therefore no reason to quash the Registrar’s Decision on this basis.
Counter-claim, set off or cross demand
The Court was given no particulars of any counter-claim, set off or cross demand in the material put before the Registrar. In those circumstances, the Registrar was not precluded from issuing the order setting aside the Bankruptcy Notice. No further relevant particulars of counter-claim, set off or cross demand having been provided to this Court in the course of these proceedings. There is no reason to quash the Registrar’s Decision on this basis.
Is Morien the judgment debtor?
Paragraphs 38-40 of the Statement of Claim in the District Court Action, on which the Judgment Debt is based, provide as follows:
“38. On 6 September 2003 the second defendant at the first defendant’s direction paid $85,000 from the plaintiff’s funds in the Account to a person or entity not known to the plaintiff.
39. The payment in paragraph 38 above was made without the plaintiff’s knowledge or consent and without any direction or authorisation from the plaintiff.
40. The payment in paragraph 38 above was disclosed to the plaintiff by the first defendant on or about 18 August 2004.”[25]
[25] Exhibit R4, Affidavit of Grubb, sworn 7 February 2007 Annexure BGG2, p.16 (“Grubb’s Affidavit”).
The relief sought in the Statement of Claim against Morien does not include relief with respect to monies paid out of the “Account” referred to in paragraph 38 without authority.[26] The relief sought against the second defendant specifically seeks “an order that the second defendant pay to the plaintiff all monies paid out of the Account without the plaintiff’s authority”.[27]
[26] Grubb’s Affidavit, Annexure BGG2, p.23 (para. 81 of Statement of Claim).
[27] Grubb’s Affidavit, Annexure BGG2, p.24, (para. 82.2 of Statement of Claim).
The District Court Order giving rise to the Judgment Debt names Morien as first defendant, and Boab Finance Accounting Pty Ltd as second defendant. The Order giving rise to the liability to pay is as follows:
“1. The Plaintiff do have judgment in relation to its claim in paragraphs 38 to 40 of the Statement of Claim in the amount of $85,000.00”.[28]
[28] Morien’s Second Support Affidavit, Volume 2, p. 32.
That Order is for payment of a sum arising from a claim in paragraphs 38-40 of the Statement of Claim and directed at the second defendant (Boab Finance Accounting Pty Ltd), and in respect of which relief is sought, at paragraph 82.2 of the Statement of Claim, against the second defendant.[29] It is far from clear that the Order for payment of the Judgment Debt is against the first defendant (Morien), and indeed it appears that it is, and can only be, against the second defendant (Boab Finance Accounting Pty Ltd).
[29] Grubb’s Affidavit, Annexure BGG2, p.24, (para. 82.2 of Statement of Claim).
The matter is not illuminated by the second Order in the District Court Order which provides for the first defendant (Morien) to pay the Plaintiff’s costs,[30] nor by the draft judgment of District Court Principal Registrar Gething.[31] The latter, refers to the claim for payment of the $85,000 from the bank account of the second defendant (Boab Finance Accounting Pty Ltd), and the fact that leave was granted to amend the Statement of Claim to plead that the first defendant (Morien) owed a debt including the money paid out by the second respondent (i.e. the $85,000).[32] No mention is made in the draft judgment of paragraphs 38-40 of the Statement of Claim, and the draft judgment provides that judgment be given for Johnston in the amount of $75,597.73 on the basis that the condition for leave to defend the claim in relation to the claim for $85,000 was not met. Manifestly, they are distinct claims, not mergeable in the manner suggested for Johnston in these proceedings. Further, the amendment earlier referred to is not the basis on which the Order was made, a fact not in dispute in these proceedings.[33]
[30] Morien’s Second Support Affidavit, Volume 2, p. 32.
[31] Morien’s Second Support Affidavit, Volume 2, pp. 28-31.
[32] Morien’s Second Support Affidavit, Volume 2, p. 29.
[33] See para. 43 of the Respondent’s Outline of Submissions, 14 February 2007, and Grubb’s Affidavit, Annexure BGG2, p.16.
The Court concludes that Morien is not the subject of the Order for payment of $85,000 in the District Court Order, and therefore is, for the purposes of s.40(1)(g) of the Bankruptcy Act, not a debtor against whom a final judgment has been obtained in that amount.
The Court will therefore order that Order 2 of the Registrar’s Orders of 13 October 2006 be quashed. It follows that Order 3 of the Registrar’s Orders of 13 October 2006 also be quashed and that the Bankruptcy Notice be set aside.
Creditor’s petition
It follows from the setting aside of the Bankruptcy Notice that the Creditor’s Petition ought be dismissed. Lest the Court’s conclusion concerning the Bankruptcy Notice be incorrect the Court also proposes to deal with the application for the Creditor’s Petition.
The Court may decline to make a sequestration order if the alleged debtor proves that:
a)he is able to pay his debts (that is, he is solvent); or
b)there is other sufficient cause why a sequestration order ought not be made.[34]
Morien argued that the Court ought to decline to make a sequestration order for one or both of the above two reasons, but principally because he was solvent.
[34] Bankruptcy Act, s.52(2).
Is Morien solvent?
Solvency is relevantly expressed in terms of a debtor being “able to pay his or her debts.”[35]
[35] Bankruptcy Act, s.52(2)(a).
If Morien can prove to the Court that he is solvent the Court may in the Court’s discretion dismiss the Creditor’s petition.[36]
[36] Re Sanders; Knudsen and Yates (trading as The Hargreaves Practice) v Sanders (2003) 1 ABC(NS) 408 at 413 per Bennett J; [2003] FCA 1079 at para.22 per Bennett J (“Re Sanders”).
Solvency requires that the debtor be able to pay debts as they fall due, and arguably out of the debtor’s money. This includes both cash on hand and money reasonably quickly realisable by asset realisation. Temporary lack of liquidity will not generally constitute insolvency.[37]
[37] Sandell v Porter (1966) 115 CLR 666 at 670 per Barwick CJ.
Solvency means being “able to pay all … debts, as and when they become due and payable.”[38] Account must be taken of debts “which will fall due in the reasonably immediate future pursuant to existing obligations”[39] and whether the debtor will be able to pay them.[40]
[38] Bankruptcy Act, s.5(2).
[39] Re Sanders ABC(NS) at 414 per Bennett J; FCA at para.27 per Bennett J.
[40] Re Sanders ABC(NS) at 414 per Bennett J; FCA at para.26 per Bennett J; International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 at paras.8-10 per Katz J (“International Alpaca”); Bank of Australasia v Hill (1907) 4 CLR 1513 at 1527 per Griffith CJ.
In assessing solvency the Court ought not take account of realisable assets required for the debtor to live a reasonably comfortable and dignified existence.[41]
[41] International Alpaca at paras.15-16 per Katz J.
If the debtor is in a position to pay debts owed within a reasonable time, no sequestration ought be made.[42]
[42] Re Sarina, Ex parte Council of the Shire of Wollondilly (1980) 43 FLR 163 at 165 per Deane J; Sarina v Council of the Shire of Wollondilly (1980) 48 FLR 372 at 376 per Bowen CJ, CA Sweeney and Lockhart JJ.
Mere proof of solvency may not be sufficient: the relevant assets must be available to be realised and capable of ready realisation, so that assets not available for execution or garnishment by creditors may not be proof of an ability to pay debts, and a capacity to borrow to pay debt, but a refusal to do so, may result in a court exercising its discretion against the debtor.[43]
[43] Trojan v Corporation of Hindmarsh (1987) 16 FCR 37 at 48 per Northrup, Jenkinson and Burchett JJ; Australia and New Zealand Banking Group v Foyster [2000] FCA 400 at para. 17 per Hely J; Dunn, in the Matter of Dunn v Vangsnes [2000] FCA 1051; Re Capel; Ex parte Caram Finance Australia Limited [1998] FCA 372.
In this case Morien provided Solvency Statement Affidavits[44] setting out in detail his financial position.
[44] Affidavit of Morien, sworn 7 February 2007 (“Morien’s Solvency Statement Affidavit”) (Exhibit A5); Affidavit of Morien, sworn 19 February 2007 (“Morien’s Second Solvency Statement Affidavit”) (Exhibit A6). Morien’s Second Solvency Statement Affidavit was tendered, by leave, in Court, and a sworn copy filed, by leave, after the hearing.
In short, the financial position is that Morien had:
a)immediately available cash funds in excess of $378,000;[45]
b)further cash funds of about $21,000 available within 14 days if he sold shares he personally held in public corporations listed on the Australian Stock Exchange;[46] and
c)within 30 days further cash funds in excess of $322,000 subsequent to the settlement of two property disposals by family trusts.[47]
[45] Morien’s Solvency Statement Affidavit, at para. 3 ($390,000); Morien’s Second Solvency Affidavit, at para 2 ($378,000).
[46] Morien’s Solvency Statement Affidavit, at para. 4 ($20,000); Morien’s Second Solvency Affidavit at para. 2. ($21,000).
[47] Morien’s Solvency Statement Affidavit, at para. 5 ($320,000); Morien’s Second Solvency Affidavit at paras. 3 and 6 ($322,000).
Morien’s personal debts were $1,874.25.[48] He had minor debts payable in the future.
[48] Morien’s Solvency Statement Affidavit, at para. 6.
Morien’s financial position as summarised in the preceding two paragraphs is set out in significant detail in lengthy Annexures to his Solvency Statement Affidavits.
Morien’s Solvency Statement Affidavits were not seriously challenged in cross-examination. In any event, none of the financial detail set out by Morien was diluted by cross-examination, or at least not sufficiently to make any material difference to the sums said by Morien to be available.
In short, it appears that Morien has a sum in excess of $730,000 available to him for payment of debts. There are also considerable assets which might be the subject of execution or garnishment. Those include tax refunds, director’s fees and loans.[49] Those sums alone amount to more than $100,000, without taking account of other items which might be the subject of execution such as computer hardware, office equipment and furniture and plant and accessories.[50]
[49] Morien’s Solvency Statement Affidavit, at p. 5.
[50] Morien’s Solvency Statement Affidavit, at p. 5.
Morien demonstrated an ability to realise cash funds at short notice when this Court ordered on 9 February 2007 that the judgment sum in question ($85,000) be paid into Court within three days. It was paid in accordance with the order and remains in Court.
Bankruptcy proceedings ought not be used as debt collection.[51] Morien refuses to pay the judgment sum; he says as a matter of principle.[52] In this case:
a)there is no evidence that Johnston has endeavoured to execute against or garnishee Morien’s assets; and
b)in any event, Morien has provided evidence, which the Court accepts, of solvency.
[51] La Pegna, FLR at 369 per Lucev FM; FMCA at para. 26 per Lucev FM, citing Re Athans, Ex parte Athans (1991) 29 FCR 302 at 311 per Hill J.
[52] Compare Valassis v Bernard [2001] FCA 477 at para. 11 per Beaumont J.
In those circumstances, the Court would not, even if there were a valid bankruptcy notice, issue a sequestration order.
Orders
There will therefore be orders that:
a)in PEG 286 of 2006, that the applicant’s application to set aside the orders and judgment of the Registrar dated 13 October 2006 be upheld as to Orders 2 and 3 of these orders, and that those orders 2 and 3 be quashed;
b)the Bankruptcy Notice 372 of 2006 be set aside;
c)in PEG 273 of 2006, that the applicant’s application for a Creditor’s Petition be dismissed;
d)in PEG 286 of 2006 the sum of $85,000, paid into Court by Neil Edouard Morien pursuant to Order 1 of this Court’s orders of 9 February 2007, be released to him as soon as reasonably practicable; and
The Court will hear the parties in relation to costs in respect of both applications.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: M Hewitt
Date: 21 December 2007
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