FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Naudi v Baig [2022] FedCFamC2G 14
File number(s): ADG 154 of 2021 Judgment of: JUDGE BROWN Date of judgment: 17 January 2022 Catchwords: BANKRUPTCY – Application for review of sequestration order made by registrar – application for litigation guardian – application for adjournment – submissions made by relative of applicant – applicant asserted to be unable to attend court hearing – intervention by trustee – nature of review hearing – application dismissed – sequestration order made.
COSTS – Application for costs against non-party – matters to be considered – costs ordered to be paid out of estate.
Legislation: Bankruptcy Act 1966 (Cth), ss.40, 41, 43, 52, 153B, 154
Federal Circuit and Family Court of Australia Act 2021 (Cth), ss.190, 214, 254, 256
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021, Pt.13, rr.2.02, 2.03
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021, ss.11.02, 11.07, 11.08, 21.04
Federal Court Rules 2011Cases cited: Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8
Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal & Torres Strait Islander Corporations (No 4) (2012) 200 FCR 154
MZZGY v the Minister for Immigration and Border Protection [2014] FCA 488
Re Sarina; Ex parte Council of the Shire of Wollondilly [1980] 43 FLR 163
SFTB v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCAFC 108
Totev v Sfar (2008) 167 FCR 193Division: Division 2 General Federal Law Number of paragraphs: 129 Date of hearing: 16 December 2021 Place: Adelaide Counsel for the First Applicant: Mr Devonish Solicitor for the First Applicant: Oakbridge Lawyers Counsel for the Second Applicant: Mr Kelly Solicitor for the Second Applicant: Leventis Lawyers The Respondent: No personal appearance by the Respondent ORDERS
ADG 154 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ROBERT WILLIAM NAUDI
First Applicant
NICHOLAS DAVID COOPER IN HIS CAPACITY AS REGISTERED TRUSTEE IN BANKRUPTCY OF THE RESPONDENT
Second Applicant
AND: MIRZA FURQAN BAIG
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
17 JANUARY 2022
THE COURT ORDERS THAT:
1.The Application for Review filed by the Respondent on 14 September 2021 is dismissed.
2.The costs of the applicant and Mr Cooper arising out of these proceedings be paid out of the bankrupt estate of Mirza Furqan Baig.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These proceedings arise under the Bankruptcy Act 1966 (Cth)…
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CaseChat Overview and Summary
Naudi v Baig involved a dispute over a sequestration order, where the bankrupt, Baig, sought a review of the order made by the registrar. The bankrupt's initial bankruptcy had been annulled, but he was now facing a second bankruptcy petition filed by Naudi, the trustee of the bankrupt's estate. Baig argued that the sequestration order should not be made due to his ill health and misleading evidence. Naudi intervened in the review proceedings as an interested party.
The legal issues before the court included whether the sequestration order should be made, whether Baig was unable to attend the court hearing, and whether costs should be ordered against a non-party. The court had to consider the evidence presented by the parties, including the affidavits filed by Cooper, the trustee of the bankrupt's estate, and the submissions made by Baig's relative.
The court dismissed the application for a litigation guardian and the application for adjournment, as it did not believe these outcomes would achieve the objectives of the Federal Circuit and Family Court of Australia Act 2021. The court found that Baig was insolvent and unable to pay his debts, and therefore, the sequestration order should be made. The court also found that there were no defects in the earlier costs order, and as a result, costs were ordered to be paid out of the bankrupt's estate.
In conclusion, the court made a sequestration order in favour of Naudi, the trustee of the bankrupt's estate, and ordered costs to be paid out of the bankrupt's estate. The court found that Baig was insolvent and unable to pay his debts, and that the sequestration order should be made. The court also found that there were no defects in the earlier costs order, and as a result, costs were ordered to be paid out of the bankrupt's estate.
The legal issues before the court included whether the sequestration order should be made, whether Baig was unable to attend the court hearing, and whether costs should be ordered against a non-party. The court had to consider the evidence presented by the parties, including the affidavits filed by Cooper, the trustee of the bankrupt's estate, and the submissions made by Baig's relative.
The court dismissed the application for a litigation guardian and the application for adjournment, as it did not believe these outcomes would achieve the objectives of the Federal Circuit and Family Court of Australia Act 2021. The court found that Baig was insolvent and unable to pay his debts, and therefore, the sequestration order should be made. The court also found that there were no defects in the earlier costs order, and as a result, costs were ordered to be paid out of the bankrupt's estate.
In conclusion, the court made a sequestration order in favour of Naudi, the trustee of the bankrupt's estate, and ordered costs to be paid out of the bankrupt's estate. The court found that Baig was insolvent and unable to pay his debts, and that the sequestration order should be made. The court also found that there were no defects in the earlier costs order, and as a result, costs were ordered to be paid out of the bankrupt's estate.
Orders
Orders of the court
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Background
Background to the litigation
From the perspective of Mr Naudi and Mr Cooper, the issue of the appointment of a litigation guardian is something of a distraction. It being there position that it is in the interests of Mr Baig’s creditors, of which Mr Cooper asserts there are many, that the review proceedings be expedited by the court.BACKGROUND The bankrupt was a builder. He was the sole director of a company Softec Homes Pty Ltd. Softec Homes has been placed into liquidation. I am unaware of the identity of the liquidator and what was the company’s level of indebtedness. It seems to be the position that the bankrupt provided some form of guarantee in respect of at least some of the company’s debts. As previously indicated, the bankrupt has been subject to a previous bankruptcy, although this bankruptcy has been subsequently annulled pursuant to the provisions of Section 153B of the Act. Mr Naudi was the relevant trustee. Section 153B grants the court a discretion to annul a bankruptcy if it accepts that a creditor’s petition should not have been accepted. Section 154 deals with the effect of an annulment. Dispositions of property made by the relevant trustee remain valid and the trustee remain able to utilise any property remaining vested in him to pay his remuneration. Otherwise property previously vested in the trustee reverts to the bankrupt. The circumstances surrounding the first bankruptcy are as follows. On 29 November 2018, following the service of a Bankruptcy Notice, dated 5 November 2018, Stair Lock Pty Ltd filed a creditor’s petition against Mr Baig, on the basis of what was asserted to be an unsatisfied judgment issued in its favour, entered in the Adelaide Magistrates Court, on 20 June 2018, in an amount of $49,122.03, against Mr Baig. On 21 March 2019, Registrar Colbran ordered that the bankrupt’s estate be sequestrated and fixed Stair Lock’s costs in an amount of $8,371.00 to be paid from his estate. The Registrar further noted that Mr Naudi had consented to act as trustee. On 26 March 2019, the bankrupt sought to review the relevant decision on the basis that the judgment entered in the Magistrates Court, in favour of Stair Lock, had been incorrectly entered against him on the basis of misleading evidence, which had been unethically and unprofessionally obtained. Mr Naudi was informed of the bankrupt’s application and, on 5 April 2019, filed an affidavit in court, in which he indicated that had begun to incur fees and disbursements for his professional work in administering the bankrupt’s estate and meeting his various statutory obligations. In early 2020, Mr Naudi formally intervened in the bankruptcy review proceedings between Stair Lock and the bankrupt as an interested party. Throughout the first half of 2019, it appears to be the case that proceedings to set aside the original judgment debt proceeded through the Adelaide Magistrates Court, whilst Judge Heffernan, formerly a member of this court, adjourned the review application from time to time.
Evidence
Evidence Before The Court
Section 190 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) provides that the overarching purpose of these Rules is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible[22]. For reasons upon which I will expand in due course, I do not consider that the appointment of a litigation guardian, in all the circumstances of this case or their general adjournment, will achieve these objective. Certainly, these outcomes will not be in the interests of other potential creditors of the bankrupt.[23] In this context, in my view, the evidence of Mr Cooper is crucial.[22] Federal Circuit and Family Court of Australia Act 2021 (Cth) s 190.[23] SFTB v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCAFC 108 at [10].THE EVIDENCE OF MR COOPER Mr Cooper has provided two affidavits filed on 9 and 15 December 2021 respectively. The second affidavit, in effect, is an up-date of the first. Mr Cooper has deposed that, as at 15 December, in his capacity as the trustee of the bankrupt’s estate, he had received eight proofs of debt in respect of the bankrupt in a combined amount of $9,257,657.31. One of these proofs relates to the Australian Taxation Office and relates to income tax in an amount of $10,380.72. In addition, Mr Cooper deposes that one of the creditors, HST Building Group Pty Ltd, the proof of which is in an amount of $519,609.28, has indicated a willingness to be substituted as a crediting petitioner in the sequestration proceedings against Mr Baig. In his capacity as trustee of Mr Baig’s estate, Mr Cooper has, as of 10 November 2021, provided a report to his creditors. Mr Cooper has ascertained that the bankrupt is a joint proprietor of six real properties in South Australia and one in Victoria. The South Australian properties are mortgaged to the ANZ Bank securing an amount of approximately $1.5m. The properties are also subject to caveats from other individuals who purport to be creditors of the bankrupt. Significantly, Mr Cooper has ascertained that the other joint proprietor of the properties is Dr Baig. In these circumstances, Mr Cooper is concerned that Dr Baig may have a conflict of interest with that of his brother, the bankrupt. Mr Cooper is critical of Dr Baig that he has not previously disclosed this state of affair to either the court or to him until he (Mr Cooper) ascertained it to be the position. Up to this stage, Mr Cooper has not been able to ascertain that the bankrupt has any other assets or sources of income. In these circumstances, it is the submission of Mr Kelly that it is apparent that the bankrupt is insolvent.CONCLUSIONS In this case, I am satisfied that the matters specified in the petition of Mr Naudi have been established, namely the judgment debt entered in his favour by Judge Heffernan remains unsatisfied. I am also satisfied that the relevant petition was properly served on Mr Baig. Accordingly the matters specified in section 52(1) of the Bankruptcy Act 1966 (Cth) are satisfied and the court has the authority to make a sequestration order.
Decision
Reasons for decision
Up to this stage, Mr Cooper has not been able to ascertain that the bankrupt has any other assets or sources of income. In these circumstances, it is the submission of Mr Kelly that it is apparent that the bankrupt is insolvent.CONCLUSIONS In this case, I am satisfied that the matters specified in the petition of Mr Naudi have been established, namely the judgment debt entered in his favour by Judge Heffernan remains unsatisfied. I am also satisfied that the relevant petition was properly served on Mr Baig. Accordingly the matters specified in section 52(1) of the Bankruptcy Act 1966 (Cth) are satisfied and the court has the authority to make a sequestration order. On the basis of the evidence of Mr Cooper, I am satisfied that the bankrupt is not able to pay his debt. In my view, this evidence indicates that the bankrupt is insolvent. More significantly, in the context of the current matter, I do not consider that Mr Baig is able to establish any other sufficient cause as to why the sequestration order should not be made. Certainly, his assertion of ill health is not sufficient cause, although it may precipitate sympathy for his situation. In my view, what the evidence available to me indicates is that he was aware of the costs implications of the earlier annulment proceedings and the quantum of the costs applicable to Mr Naudi, his first bankruptcy trustee. In these circumstances, the fact that there are no proceedings on foot in respect of the relevant order of Judge Heffernan, made on 16 June 2020 must be a central consideration. The order made by His Honour, ostensibly with the consent of Mr Baig, has no obvious defects. It appears to have been regularly entered. The order was made following protracted proceedings, in which Mr Baig took part. Throughout these proceedings, there can be no doubt that Mr Naudi consistently voiced his positon that he remained entitled to costs notwithstanding Mr Baig was challenging the basis on which the debt leading to his bankruptcy was based in another court. Mr Naudi also indicated that his costs would be greater than that usually awarded in bankruptcy petition cases due to the complexity of Mr Baig’s financial affairs. Given the matters raised by Mr Cooper, in respect of the second petition, it appears clear that this level of complexity is real, given the insolvency of the construction company of which Mr Baig was formerly a director. In addition, due to a desire to ensure that there can be no subsequent challenge made to the level of costs sought by him, Mr Naudi sought to have his costs assessed by AFSA. Accordingly, when the costs order was made, Mr Baig was fully aware of the quantum of the costs sought against him. As a consequence of the current petition, Mr Baig has sought to impugn the actions of the solicitor who appeared on his behalf on this date and has asserted that he acted without his instructions in his apparent consent to the entry of the relevant costs order, which founds the current petition.
Ratio Decidendi
Legal Principle Established
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