Nguyen v Commonwealth Securities Ltd - [2009] FMCA 1328

FEDERAL MAGISTRATES COURT OF AUSTRALIA

NGUYEN v COMMONWEALTH SECURITIES LTD

[2009] FMCA 1328

BANKRUPTCY – Annulment of bankruptcy – grounds relied on for annulment not supported by the facts – application dismissed.

Bankruptcy Act 1966, ss.153A, 153B(1), and 74
Federal Magistrates Court (Bankruptcy) Rules 2006, Division 13.1

Applicant:

KHOA DANG NGUYEN

Respondent:

COMMONWEALTH SECURITIES LTD

File Number:

MLG 1491 of 2009

Judgment of:

O’Dwyer FM

Hearing date:	7 December 2009
Date of Last Submission:	7 December 2009

Delivered at:

Melbourne

Delivered on:

7 December 2009

REPRESENTATION

The Applicant:

In Person

Counsel for the Respondent:

Mr Fox

Solicitors for the Respondent:

Turks Legal

ORDERS

The application filed on 20 November 2009 is dismissed.
The applicant pay the respondent’s costs in accordance with Division 13.1 of the Federal Magistrates Court (Bankruptcy) Rules 2006, such costs to be paid from the applicant’s estate.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 1491 of 2009

KHOA DANG NGUYEN

Applicant

And

COMMONWEALTH SECURITIES LTD

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

This matter comes before me today on a referral from the Registrar’s List in respect of an application by Mr Nguyen who seeks to have a bankruptcy annulled. The sequestration order was made on 20 November 2008 and in consequence of the administration of his estate by Mr White, the appointed trustee, a caveat was lodged over Mr Nguyen’s property located at 16 Dalgety Street, Dandenong.

Mr Nguyen wants the caveat removed. Mr Nguyen has made application to have the bankruptcy annulled, pursuant to section 153B (1) and also section 153A (1). He has also made reference to section 74 of the Bankruptcy Act as a basis for his application today.
The history of this matter is that Mr Nguyen purchased through Commonwealth Securities Limited shares which were held after purchase by that organisation pending payment of the costs of purchase and any fees associated with the purchase. Mr Nguyen, having purchased the shares, was dependent upon a third party providing him with the money to cover the costs of purchase but that third party let him down. As a consequence, in due course, Commonwealth Securities Limited realised the shares. As a consequence, there was a shortfall between the purchase price and the sale price. That shortfall was $15,963.89.
That figure, it appears, was not paid and as a consequence judgment was sought and entered by default in the Melbourne Magistrate’s Court for that figure plus costs. Consequent to that, there was a bankruptcy notice served on 3 August 2008, which notice was not complied with and on 20 October 2008 a creditor’s petition was served which led in due course to the order for the sequestration of Mr Nguyen’s estate on 20 November 2008.
Now, Mr Nguyen tells me from the bar table today that he was not served with the documentation upon which the sequestration order was based. He draws issue on that and he challenges the veracity of the process server who has filed two affidavits of service in this matter; one in respect of service of the bankruptcy notice and the other in respect of the petition.
He acknowledges, however, that he became aware of the bankruptcy when his accounts were frozen at the Commonwealth Bank. He made contact by telephone – and this is not disputed in any way – with the trustee on 13 January 2009 and later, from the bar table, admitted an attendance on the trustee’s office in March 2009. He was required, and informed of that requirement, to fill in and lodge a Statement of Affairs, but he admits that he was slow in doing so and it dragged on for some little while, but he complied with that request prior to initiating this application. It is to be noted that he acquiesced in the sequestration order and reluctantly complied with the obligation to lodge a Statement of Affairs, albeit very late after he was required to. He states that an explanation for his failure to comply more readily with that request for the filing of the Statement of Affairs, and indeed for taking so long to initiate this proceeding, is that he suffered a motor cycle accident in early February 2009 and that he has suffered ill health as a consequence. I understood him to be saying that the accident has been quite debilitating and, indeed, that event, being the motor cycle accident, is now subject to legal process; no doubt, to seek compensation for the injuries Mr Nguyen has suffered. However, he has not produced anything today in support of his assertions, whether as to the happening of the accident or the nature of the injuries he sustained, and whether such may have affected his capacity to respond to the bankruptcy in a timely manner. On his own admission, he attended at the office of the trustee in March 2009 at a time he suggests he was incapacitated from injuries sustained.
He comes here today on an application filed on 20 November 2009, some 12 months after the sequestration order, to seek to annul the bankruptcy order. He wishes also, in his application, to have a caveat removed from the property at 16 Dalgety Street, Dandenong that has been lodged by the trustee. He is anxious to remove, as I took it and understood it, the restrictions that flow from a subsisting bankruptcy in order to allow him to pursue another business venture and he is anxious to wipe off the debt that he has so that he can progress, no doubt, with the rest of his financial life. He professed a number of times his willingness to pay the original debt which he accepts as owed.
He does draw issue, however, with the present outstanding balance that is owed which has been estimated to be in the vicinity of $62,000. Not unreasonably, he says, “How does it jump from $16,000 to $62,000” and he complains that had he known earlier about the nature of the process that he finds himself embroiled in he could have got family to pay it out earlier and would not be in this position today of owing so much money.
But the reality is that that did not happen and there is, at the moment, on the face of the material before me, a subsisting requirement for him to pay in the vicinity of $62,000 - the extra amounts being accrued by way of fees to the trustee and the costs associated with the administration of the estate. He also draws issue with an estimate of the trustee’s costs previously sent to him of some $1,600 and, again, has asked, “How does that jump from that amount to something in the vicinity of $50,000.”
It is the alleged excessive fees of the trustee that he vigorously disputes today. I share his concern in that regard, but the trustee assures me the earlier estimate provided to him was a minimal charge for an estate with little assets. Because the applicant’s estate includes real estate, the fees have increased accordingly. The trustee assures me the fees can be justified. In any event, the question of the appropriateness of the fees is not a matter before me today.
Of course, as I pointed out to Mr Nguyen, this is a legal process and I am obliged to make decisions based upon what the law says I should do and, in that regard, I have to look at what ground exists that would give me the jurisdiction to make the order sought by Mr Nguyen.

In that regard, I shall deal sequentially with the sections relied on by the applicant.
Section 153A relates to the annulment on the payment of debts.

Now, that provision allows for, in broad terms and simple terms, that once all the debts that had been proved owing to debtors have been paid then application can be made, which is generally done with the approval of the trustee, to have an order annulling the bankruptcy. It is obvious that that section is not applicable as the debt has not been repaid and is still owing even though I do accept Mr Nguyen is anxious to pay the original debt. The application is premature if it is based upon that section.
The next section that is relied on by Mr Nguyen is section 153B(1) which provides:
If the court is satisfied that a sequestration order ought not to have been made, or in the case of a debtor’s petition that the petition ought not to have been presented, or ought not to have been accepted by the official receiver the court may -
and I emphasise the word “may” -

make an order annulling the bankruptcy.

Mr Nguyen, in support of that aspect, says, well, he did not know about the bankruptcy notice or the petition and he alleges the process server that filed affidavits stating that he was personally served has committed perjury. The first point I make is that I would need to have the process server brought before the court, and cross-examined as to the basis of his affidavit. The burden of getting him here rests with the applicant. If the process server is not willing to come here voluntarily then he needed to be subpoenaed. The applicant has not ensured the attendance of the process server and I see no reason why I should not accept his affidavits - should not accept that service was effected as deposed.
Section 153B(1) is a discretionary provision. There is an obligation on the applicant to have taken steps at an appropriate time to challenge the bankruptcy order, and challenge the bankruptcy notice and challenge the petition by making a timely application. It is obvious that by 13 January 2009 the applicant was fully aware of what had happened, had finally complied with the provision of a Statement of Affairs, but has sat on his hands for some many months until 20 November 2009 to initiate any process in the court. In those circumstances I am not persuaded that I ought to exercise my discretion, even if there was a basis for the allegations made by the applicant, which I am not satisfied there is such a basis.
The other significant aspect, based upon the admissions made from the bar table today by Mr Nguyen, is that there does not seem to be a challenge to the underlining judgment debt. I am satisfied that the applicant has been galvanised into action, after knowing of the bankruptcy for many months, by a more recent prospect of a business venture which is being frustrated by his bankruptcy.
The final ground is said to be founded under section 74. That section provides annulments of sequestration orders where there has been a composition by the parties. No composition applies here, so that is irrelevant to this proceeding.
The applicant did not advance any ground for an order from me requiring the removal of the caveat over his property. That aspect of his application appears without substance and must be dismissed.
For all of the reasons I have just outlined, there is no basis for the application before me today, and I intend to dismiss it.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of O’Dwyer FM

Associate:

Date: 7 December 2009