MOTTAGHI v Subway Shoe Diffusion Pty Ltd - [2011] FMCA 246

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MOTTAGHI v SUBWAY SHOE DIFFUSION PTY LTD

[2011] FMCA 246

BANKRUPTCY – Review of Registrar's decision in relation to Sequestration Order – exclusion of evidence in relation to settlement negotiations.

Bankruptcy Act 1966, ss.52(2)(a), 52(2)(b)
Evidence Act 1995, s.131
Federal Magistrates Act 1999, s.104

Seven Network Limited v News Limited [2006] FCA 343
McIntosh v Shashoua (1931) 46 CLR 494

Applicant:

MAJID MOTTAGHI

Respondent:

SUBWAY SHOE DIFFUSION PTY LTD

File Number:

MLG 1466 of 2010

Judgment of:

Whelan FM

Hearing date:

15 March 2011

Date of Last Submission:

15 March 2011

Delivered at:

Melbourne

Delivered on:

18 March 2011

REPRESENTATION

Solicitors for the Applicant:

Pace Lawyers

Counsel for the Respondent:

Mr Fary

Solicitors for the Respondent:

Collins & Stephens Lawyers

ORDERS

The Sequestration Order made by Registrar Hetyey dated 23 December 2010 be affirmed and remains in full force and effect.
The application for review be dismissed.
The Petitioning Creditor’s costs of and incidental to the petition, including reserved costs, be taxed pursuant to Order 62 of the Federal Court Rules and paid in accordance with the statute.
The Trustee in Bankruptcy’s costs in relation to these proceedings be taxed pursuant to Order 62 of the Federal Court Rules and paid in accordance with the statute.

AND THE COURT NOTES THAT:

A. The date of the act of bankruptcy is 20 September 2010.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 1466 of 2010

MAJID MOTTAGHI

Applicant

And

SUBWAY SHOE DIFFUSION PTY LTD

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

Introduction

This is an application for review pursuant to s.104 of the Federal Magistrates Act 1999 of the exercise of power of Registrar Hetyey on 23 December 2010 in which a Sequestration Order was made against the estate of Majid Mottaghi. The petitioning creditor set out a brief chronology of the relevant events and I refer to them now. On 23 April 2010, judgment was obtained by the creditor against the debtor in the sum of $10,432.29 in the Magistrates Court at Melbourne. On 30 August 2010, a bankruptcy notice was served on the debtor in the amount of $10,633.43, and as the debt was not paid, nor arrangements made to settle the debt within 21 days, an act of bankruptcy occurred on 20 September 2010. On 22 October, a creditor’s petition was presented, and this was served on the debtor on 11 November 2010.
The matter was listed before Registrar Pringle on 16 December and was adjourned, at the debtor’s request, until 23 December 2010. The debtor did not appear on the adjourned date and a Sequestration Order was made by Registrar Hetyey on that date. On 12 January 2011, the application for review was filed. On 16 February, the Orders of the Registrar were stayed on certain conditions and the hearing set down for 15 March 2011.
It was not disputed that the petitioning creditor had satisfied the requirements of s.52 of the Bankruptcy Act 1966 (Cth) (“the Act”). Affidavit…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] FMCA 246
Decision Date: 18 March 2011

CaseChat Overview and Summary

The case involved the petitioner, Mr. Mottaghi, and the respondent, Subway Shoe Diffusion Pty Ltd. The nature of the dispute was a review of a sequestration order, which is a legal process for declaring a person bankrupt. The court hearing this matter was the Federal Court of Australia. Mr. Mottaghi had filed a petition for bankruptcy against Subway Shoe Diffusion Pty Ltd, and a sequestration order was made on 23 December 2010 by Registrar Hetyey. Subway Shoe Diffusion Pty Ltd subsequently applied for a review of this order.

The primary legal issues for the court to decide were whether the sequestration order was correctly made and if the application for review should be upheld. The court had to consider whether the act of bankruptcy, which was the failure to pay debts as they fell due, was correctly identified and whether there were any grounds to set aside the order. The court also needed to determine whether the review application had merit and if it was appropriate to dismiss the application.

The court thoroughly examined the evidence and arguments presented by both parties. It found that the act of bankruptcy was correctly identified as occurring on 20 September 2010 and that the sequestration order was appropriately made. The court concluded that the application for review lacked sufficient grounds to warrant a setting aside of the order. Consequently, the court dismissed the application for review and affirmed the sequestration order. The court also ordered that the costs of the petition and the costs related to the proceedings be taxed and paid in accordance with the Federal Court Rules.

The final orders included the affirmation of the sequestration order, the dismissal of the review application, and the direction for the taxation of costs. The court noted the date of the act of bankruptcy to be 20 September 2010.

Orders

Orders of the court

The Sequestration Order made by Registrar Hetyey dated 23 December 2010 be affirmed and remains in full force and effect.

The application for review be dismissed.

The Petitioning Creditor’s costs of and incidental to the petition, including reserved costs, be taxed pursuant to Order 62 of the Federal Court Rules and paid in accordance with the statute.

The Trustee in Bankruptcy’s costs in relation to these proceedings be taxed pursuant to Order 62 of the Federal Court Rules and paid in accordance with the statute.

AND THE COURT NOTES THAT:

A. The date of the act of bankruptcy is 20 September 2010.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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