Owners - Strata Plan No 7938 v Toseska
[2024] FedCFamC2G 985
•4 October 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Owners - Strata Plan No 7938 v Toseska [2024] FedCFamC2G 985
File number(s): SYG 1934 of 2023 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 4 October 2024 Catchwords: BANKRUPTCY - Application for review of sequestration order made by Registrar – whether preconditions for making sequestration order are satisfied – whether there is any reason why a sequestration order ought not be made – application for review dismissed and sequestration order affirmed. Legislation: Bankruptcy Act 1966 (Cth) ss 47, 52(1)
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 256
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) rr 2.02(3), 4.02, 4.04(1)(a), 4.06(3)
Bankruptcy Regulations 2021 (Cth) reg 10(1)(b)
Cases cited: Bechara v Bates [2021] FCAFC 34
Conlan v Mladenis [2007] FCA 1129
Division: General Number of paragraphs: 30 Date of hearing: 25 September 2024 Place: Sydney Solicitor for the Applicant: Mr F Shafiq of JS Mueller & Co Lawyers The Respondent: Appeared in person ORDERS
SYG 1934 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: THE OWNERS - STRATA PLAN NO 7938
Applicant
AND: LILJANA TOSESKA
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
4 OCTOBER 2024
THE COURT ORDERS THAT:
1.The application for review of the sequestration order made against the estate of the respondent by the Registrar on 25 June 2024 is dismissed.
2.The sequestration and other orders made by the Registrar on 25 June 2024 are affirmed.
3.The applicant’s costs be paid out of the estate of the respondent and have the same priority as the costs of the creditor’s petition.
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
INTRODUCTION
The respondent, Ms Toseska, applies for the review of a sequestration order a Registrar of this Court made against Ms Toseska’s estate on 25 June 2024. The Registrar made the sequestration order on the presentation by the applicant (Creditor) of a creditor’s petition filed on 4 December 2023.
The act of bankruptcy on which the Creditor relies is Ms Toseska’s failure to comply with the requirements of a bankruptcy notice (Bankruptcy Notice) that was issued on the Creditor’s application on 17 February 2023. The Bankruptcy Notice demanded that Ms Toseska pay to the Creditor $29,282.63, being the sum of two judgments entered in the Local Court of New South Wales in favour of the Creditor against Ms Toseska, one on 11 April 2022, and the other on 9 December 2022, together with interest and costs. The judgments arose on the registration of costs certificates that were issued in relation to the assessment of costs that Ms Toseska was ordered to pay the Creditor in proceedings (NCAT Proceedings) the Creditor commenced against Ms Toseska in the NSW Civil & Administrative Tribunal (NCAT).
PROCEDURAL HISTORY
As I have already noted the Bankruptcy Notice was issued on 17 February 2023. The Creditor, however, encountered difficulties in personally serving the Bankruptcy Notice on Ms Toseska. That led the Creditor to do two things. The first was to apply for, and on 11 August 2023 obtain from the Official Receiver, a determination pursuant to paragraph 10(1)(b) of the Bankruptcy Regulations 2021 (Cth) that the time for service of the Bankruptcy Notice be extended to 25 September 2023. The second thing is that the Creditor applied for an order for substituted service of the Bankruptcy Notice.
On 31 August 2023 a Registrar of the Court made an order (First Substituted Service Order) that, by 25 September 2023, the Bankruptcy Notice be served on Ms Toseska by sending the Bankruptcy Notice by ordinary pre-paid post to Ms Toseska at an address in Rockdale New South Wales (Rockdale Address), an address in Whelan, New South Wales, and at a post box address in Rockdale, New South Wales (PB Address). The Registrar further ordered that the Bankruptcy Notice shall be deemed to be served on Ms Toseska on 2 October 2023, and that the Bankruptcy Notice be amended by deleting from paragraph 1 “after service on you of the Bankruptcy Notice” and substituting “after 25 September 2023”. That means that, provided the Creditor served the Bankruptcy Notice in accordance with the First Substituted Service Order, Ms Toseska was required to comply with the Bankruptcy Notice within 21 days “after 25 September 2023”, namely, by 16 October 2023.
On 14 September 2023 Mr Shafiq, the Creditor’s lawyer, caused the Bankruptcy Notice, a sealed copy of the First Substituted Service Order, and other documents to be forwarded by prepaid ordinary post to Ms Toseska at each of the three addresses specified in the First Substituted Service Order, including the PB Address.[1] Ms Toseska did not comply with the Bankruptcy Notice.
[1] Affidavit of service of Bankruptcy Notice made by Faiyaaz Shafiq on 30 November 2023.
On 4 December 2023 the Creditor filed the creditor’s petition which was made returnable on 25 January 2024. The Creditor, having again encountered difficulties in personally serving the creditor’s petition on Ms Toseska, applied for an order for substituted service. On 15 March 2024 a Registrar made an order for substituted service (Second Substituted Service Order) in which personal service of the creditor’s petition was dispensed with, and the Creditor was ordered to serve the creditor’s petition on Ms Toseska by handing a sealed copy of the creditor’s petition to a person apparently over the age of 16 years at the property located at the Rockdale Address, by sending a sealed copy to the addresses referred to in the First Substituted Service Order, and by the Creditor sending a text (sms) message to Ms Toseska’s mobile telephone number.
The creditor’s petition came before a Registrar at 11:00 am on 14 April 2024. Ms Toseska, who was not legally represented, appeared at the hearing. The Registrar ordered that the further hearing of the creditor’s petition be adjourned to 11.00 am on 14 May 2024, and made the following notation to the orders he made:
Ms Toseska appeared at the hearing today, representing herself, and I understand from the solicitor for the Applicant that he provided Ms Toseska with a complete copy of the affidavit of service of the creditor’s petition, and all annexures to it, outside court today while the matter was stood down in the list. Therefore, I am entirely satisfied that the requirements of service of the creditor’s petition have been met.
The solicitor for the Applicant also furnished Ms Toseska with a copy of a bill of costs at the bar table.
On 14 May 2024 the Registrar ordered that Ms Toseska file a notice of appearance by no later than 28 May 2024, and that, by 11 June 2024, Ms Toseska file and serve an affidavit evidencing in sufficient detail the nature and substance of each ground of opposition that she presses against the creditor’s petition, and annexing all documents relevant to those grounds. The Registrar also ordered that the further hearing of the creditor’s petition be adjourned to 11.00 am on 25 June 2024.
On 12 June 2024 Ms Toseska filed an affidavit she made on that day in which deposes to the following matters:
(a)She is the owner of the unit (Unit) that is located at the Rockdale Address.
(b)She has obtained a copy of the “Owner Ledger” which records that “many receipts are entered as paid”; and she is not avoiding the payment of any levies.
(c)Ms Toseska bought the Unit in 2002. The garage that formed part of the Unit contained a partition that had been built by the previous owner, and there was no record of anyone having complained about it.
(d)Ms Toseska’s son lived in the garage that formed part of the Unit until 2013 when a tenant moved in. The owner of another unit started to complain (other owner).
(e)In 2014, after she was required to vacate the premises in which she had been living, Ms Toseska had nowhere to go except that part of the garage behind the partition in the garage to the Unit.
(f)A large number of interactions with the other owner.
(g)The demolition of the partition in the garage to the Unit.
Ms Toseska appeared at the hearing of the creditor’s petition before the Registrar on 25 June 2024. A person was granted leave to appear as a “McKenzie’s Friend” for Ms Toseska. The Registrar made a sequestration order, and an order that the Creditor’s costs be paid from Ms Toseska’s estate.
On 15 July 2024 Ms Toseska filed an application for review of the Registrar’s orders of 25 June 2024. In the section headed “Order sought” Ms Toseska stated as follows:
The issues with the Bankruptcy is not presented clearly. As I had no interpreter with me. The applicant (Strata management) want to get my unit and leave me on the street homeless
PROCEEDING ON REVIEW
The application for review came before me for directions on 6 August 2024. On that day I made a number of orders, including an order that Ms Toseska file and serve all affidavits on which she intends to rely by 27 July 2024; and I set Ms Toseska’s application for review for hearing on 25 September 2024.
Ms Toseska appeared at the hearing on 25 September 2024 without any legal or other assistance. Mr Shafiq appeared for the Creditor. I explained to Ms Toseska the purpose of the hearing, namely, that it was the hearing of her application for review of the sequestration and other orders the Registrar made on 25 June 2024, explaining to her that although the application she had filed was for the review of the Registrar’s orders, the question before me was not whether the Registrar had made the correct decision, but whether I am satisfied that a sequestration order should be made. I then explained the procedure that would be followed, namely, that Mr Shafiq will identify the affidavits on which the Creditor relies to establish the preconditions for the making of a sequestration order; Ms Toseska will then identify the material on which she intended to rely; and each party will be given the opportunity to make submissions. The parties read their affidavits and then made submissions.
THE APPLICATION FOR REVIEW - PRINCIPLES
Ms Toseska has applied for a review of the Registrar’s orders pursuant to s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFC Act) which, together with s 256(2), provides:
(1)A party to proceedings in which a delegate has exercised any of the powers of the Federal Circuit and Family Court of Australia (Division 2) under section 254 may:
(a) within the time prescribed by the Rules of Court; or
(b) within any further time allowed in accordance with the Rules of Court;
apply to the Court for review of that exercise of power.
(2)The Federal Circuit and Family Court of Australia (Division 2) may, on application under subsection (1) or on its own initiative, review an exercise of power by a delegate under section 254, and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised.
The time for applying for review has been prescribed by r 2.02(3) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules), and it is within 21 days after the day on which the power was exercised.
A review under s 256(2) of the FCFC Act is a “hearing de novo”. That means that an: [2]
applicant for review under [s 256(2)] is under no obligation to demonstrate error on the part of the Registrar, and does not need to establish that the Registrar’s exercise of discretion miscarried in the sense described in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505: Pattison v Hadjimouratis [2006] FCAFC 153 at [153]- [154].
[2] Conlan v Mladenis [2007] FCA 1129, at [5] (Sundberg J)
Further:[3]
The hearing (or rehearing) of the creditor’s petition is not prosecuted by the debtor (applicant for review) but by the creditor in the proceeding in which the registrar’s order was made.
The application for review is a demand that the claim for relief (the sequestration order) be heard by a judge.
The onus is upon the creditor to prosecute its petition. The only onus of the debtor/bankrupt against whose estate a sequestration order has been made is to prove either solvency or any other sufficient cause under s 52(2) of the Bankruptcy Act 1966 (Cth).
[3] Bechara v Bates [2021] FCAFC 34, at [27]
PROOF OF MATTERS IN S 52(1) OF THE BANKRUPTCY ACT AND BANKRUPTCY RULES
Subsection 52(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) provides as follows:
At the hearing of a creditor’s petition, the Court shall require proof of:
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
The matters that must be stated in a creditor’s petition are prescribed by s 47(1A) of the Bankruptcy Act, which provides that if “the rules of court prescribe a form for the purposes of this subsection, the petition must be in the form prescribed”. Rule 4.02 of the Bankruptcy Rules prescribes a form for the purposes of s 47(1A) of the Act. The form requires the creditor, among other things, to identify the act of bankruptcy on which the creditor relies, and the debt or debts the creditor claims the debtor owes it.
In the creditor’s petition filed on 4 December 2023, the Creditor claims Ms Toseska failed to comply, on or before 16 October 2023, with the requirements of the Bankruptcy Notice, being 21 days after 25 September 2023. At the hearing I understood Ms Toseska to have suggested that she first became aware of the Bankruptcy Notice when she appeared before the Registrar on 14 April 2024. After further discussion, Ms Toseska accepted that she had received documents at the PB Address. I am satisfied that the Creditor served the Bankruptcy Notice in accordance with the First Substituted Service Order;[4] and that Ms Toseska was required to comply with its requirements by 16 October 2023.
[4] Affidavit of service of Bankruptcy Notice of Faiyaaz Shafiq made on 30 November 2023
The creditor’s petition is in the prescribed form, and, as required by s 47 of the Bankruptcy Act, an affidavit verifying it has been made by an authorised person.[5] The Creditor also filed, at the time it filed the creditor’s petition, an affidavit required by r 4.04(1)(a) of the Bankruptcy Rules,[6] and, on 4 December 2023, Mr Shafiq’s affidavit of service of the Bankruptcy Notice. The Creditor also filed a “Trustee Consent to Act Declaration” signed by Mr Michael Gregory Jones.
[5] Affidavit verifying creditor’s petition of M D Mattingley made on 15 November 2023
[6] Affidavit of J S Mueller made on 30 November 2023
The creditor’s petition filed on 4 December 2023, together with the affidavit required by r 4.04(1)(a) of the Bankruptcy Rules, and the affidavit of service of the Bankruptcy Notice, were served on Ms Toseska.[7] Further, I read an affidavit of debt,[8] being an affidavit which, under r 4.06(4) of the Bankruptcy Rules, must be made as soon as practicable before the hearing of the creditor’s petition, and also an affidavit of search,[9] as required by r 4.06(3) of the Bankruptcy Rules.
[7] Affidavit of Service of J S Mueller made on 26 April 2024
[8] Affidavit of Debt of S Tricklebank made on 24 September 2024
[9] Affidavit of Search of J S Mueller made on 24 September 2024
I am satisfied the Creditor has proved the matters it is required to prove under s 43 and s 52(1) of the Bankruptcy Act and the Bankruptcy Rules and, for that reason, the preconditions for the making of a sequestration order are satisfied.
SHOULD A SEQUESTRATION ORDER BE MADE?
In her oral submissions Ms Toseska referred to a number of matters. One is a matter to which I have already referred, namely, a suggestion that Ms Toseska first received notice of the Bankruptcy Notice when she appeared before the Registrar on 14 April 2024. I have already noted that Ms Toseska accepted that she had received documents in the PB Address and that, in any event, I am satisfied that the Creditor served the Bankruptcy Notice in accordance with the First Substituted Service Order.
The second matter to which Ms Toseska referred were general assertions that she had not been given notice of the NCAT Proceedings. Ms Toseska did not support these assertions with any evidence; and, in any event, Ms Toseska has not taken any steps to set aside the orders that were made in the NCAT Proceedings on the basis of which the Creditor registered the costs assessments as judgments, and on the basis of which it applied for the issue of the Bankruptcy Notice.
The third matter to which Ms Toseska referred were statements that she was willing to pay all that she owed to the Creditor. In that regard it is necessary to refer to the affidavit Ms Toseska made on 27 August 2024. In that affidavit Ms Toseska deposes she is the registered proprietor of the Unit; the Unit has a value of approximately $700,000; Ms Toseska receives weekly income of $1,020; and she has weekly expenses of $959.91. Ms Toseska says she understands the Creditor claims the following amounts from her:
(a)$1,468.62, being contributions for the period from 1 April 2021 to 1 January 2022 inclusive due and payable to the Administration Fund and Capital Works Fund levied by the Creditor;
(b)$9,921.24, being contributions during the period from 1 April 2022 to 1 October 2022 inclusive due and payable to the Administration Fund and Capital Works Fund levied by the Creditor;
(c)$13,931.11, being the costs ordered by NCAT on 13 December 2021 in proceedings SC 21/29030 as assessed pursuant to Supreme Court of New South Wales Assessment No. 2022/234820 representing the sum of $13,718 registered as a judgment in the Local Court a Sutherland on 9 December 2022, together with interest to 14 February 2023 amounting to $213.11;
(d)$11,339 being the costs ordered by NCAT on 30 October 2020 in proceedings SC 20/2468 as assessed by the Supreme Court of New South Wales Assessment No. 2022/23480 representing the sum of $11,273.86 registered as a judgment in the Local Court a Sutherland on 9 December 2022, together with interest to 14 February 2023 amounting to $175.14.
Ms Toseska says she disputes the $9,921.24 in paragraph 26(c) above.
Ms Toseska further deposes as follows:
21.I am in the process of making enquiries with the Trustee with a view to a Deed of Settlement being entered into whereby I obtain finance to pay out the first registered mortgagee, the Applicant and the Trustee for his remuneration and expenses, upon which I will be annulled.
22.Given the loan amount is likely to be around $130,000 at a rate of approx. 6.5%, I am of the view that I will be able to service the loan from the rent of the property and any shortfall from my pension. This is because the repayments will be $205 per week and my weekly income is $1,020. The balance of my weekly income will be enough to pay the average weekly expenses of $442 50 (strata levies and other expenses outlined above).
23.As for the figure in paragraph 22 above, I reasonably anticipate will be enough to pay the amount in paragraph 20 above plus interest and costs accrued after the relevant dates above and the Trustee’s remuneration and expenses (which a staff member of his has advised me today will be approx. $20,000); the first registered mortgagee and any valuation and costs associated with the refinance.
24. Today, I have been shown a title search for the property which indicates that there is a second registered mortgage to a company which is deregistered, Brendan King Pty Ltd (based on an free ASIC search I have caused to be performed) and a caveat lodged by an individual named Paul Michaels. There is also an order of the Court. I am making urgent enquiries with a view to having these encumbrances or dealings removed from title. The encumbrances or dealings relate to a refinance of other properties I owned over 20 years ago. As stated in paragraph 12 above, to the best of my knowledge and belief, I do not have any other creditors except for the Applicant.
It is apparent from Ms Toseska’s affidavit that she is not in a position to pay the amounts she accepts she owes to the Creditor; and that the only way she believes she will be able to pay these amounts is by obtaining a loan. There is no evidence, however, that Ms Toseska has any realistic prospect of obtaining a loan. The matters to which Ms Toseska deposes, therefore, do not satisfy me that Ms Toseska is able to pay her debts, and otherwise are not matters that would lead me to conclude that a sequestration order ought not be made.
DISPOSITION
I propose to order that the application for review be dismissed, and that the Registrar’s orders of 25 June 2024 be affirmed. I will also order that the costs of the Creditor be paid out of Ms Toseska’s estate, and that they have the same priority as the costs of the creditor’s petition.
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 4 October 2024
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