FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Pederick Lawyers Pty Ltd v Steicke [2025] FedCFamC2G 275
File number: ADG 194 of 2024 Judgment of: JUDGE BROWN Date of judgment: 28 February 2025 Catchwords: BANKRUPTCY – Creditor’s Petition for a sequestration order – whether requirements for sequestration order have been established – payment of legal fees which are disputed – whether the defendant is solvent – application for dismissal of Creditors Petition – Where the debtor is able to pay her debts but is unwilling to do so Legislation: Bankruptcy Act 1966 (Cth) ss 30, 32, 40, 41, 43, 52
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 143, 190
Federal Court of Australia Act 1976 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules rr 13.01, 13.02
Federal Circuit and Family Court of Australia (Division 2) (General Federal law) Rules 2021 (Cth) r 13.13
Federal Court Rules 2011 (Cth) Pt 40
Enforcement of Judgments Act 1991 (SA)
Cases cited: Australian & International Pilots Association v Qantas Airlines Limited (No 3) [2007] FCA 879
Australian Securities and Investment Commission v Cassimatis (2013) 220 FCR 256
ANZ Banking Group v Foyster [2000] FCA 400
Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8
Commonwealth v Harrison (No 2) (2020) 381 ALR 328
Colgate Palmolive v Cussons Pty Ltd (1993) 46 CLR 225
Deputy Commissioner of Taxation v Bayeh (1999) 100 FCR 144
Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251
Oshlack v Richmond River Council (1998) 193 CLR 72
Przybylowski v Australian Human Rights Commission (No 2) [2018] FCA 473
Re Sarina; Ex parte Wollondilly Shire Council (1980) 48 FLR 372
Riva NSW Ltd v Official Trustee in bankruptcy [2017] FCA 188
Sandell v Porter (1966) 115 CLR 666
Spencer v Commonwealth of Australia (2010) 241 CLR 118
Trojan v Corporation of Hindmarsh (1987) 16 FCR 37
Division: Division 2 General Federal Law Number of paragraphs: 151 Date of hearing: 20 February 2025 Place: Adelaide Counsel for the Applicant: Mr Thomas Solicitor for the Applicant: John Pederick Solicitor Counsel for the Respondent: Mr Gretsas appearing with Mr Hall and Mr Sankey Solicitor for the Respondent: Gretsas & Associates Counsel for the Others: Mr Rusch Solicitor for the Others: Charlton Rowley Counsel for the Others: Mr Mills Solicitor for the Others: Vardon Legal ORDERS
ADG 194 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF ELISABETH STEICKE
BETWEEN: PEDERICK LAWYERS PTY LTD
Applicant
AND: ELISABETH STEICKE
Respondent
CHARLTON ROWLEY PTY LTD (IN LIQUIDATION) ACN 604 930 952
First Supporting Creditor
JOHN CHARLTON ROWLEY
Second Supporting Creditor
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
28 FEBRUARY 2025
THE COURT ORDERS THAT:
1.Pursuant to Rule 13.13 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal law) Rules 2021 (Cth), the Creditors Petition…
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- Case
- [2025] FedCFamC2G 275
- Decision Date
CaseChat Overview and Summary
In Pederick Lawyers Pty Ltd v Steicke, the respondent, Elisabeth Steicke, faced a creditor’s petition for a sequestration order from the petitioner, Pederick Lawyers, supported by two other creditors. The dispute centred on the solvency of Ms. Steicke and her capacity to pay disputed legal fees. The case involved extensive litigation history between Ms. Steicke and various legal firms, primarily stemming from family law proceedings with her former husband. The petitioner argued that Ms. Steicke was insolvent and unable to pay her debts, while she contended that she had the means to pay but was unwilling to do so.
The primary legal issue for the court was to determine whether Ms. Steicke's ability to pay her debts could be assessed during a limited hearing based on affidavits alone. The court had to consider whether Ms. Steicke was genuinely insolvent or merely unwilling to pay her debts. The petitioner argued that given Ms. Steicke's significant assets, including cash and property, she was solvent and capable of paying her debts. Conversely, Ms. Steicke maintained that her financial situation, while solvent, did not compel her to liquidate her assets to meet her obligations.
The court found that the evidence demonstrated Ms. Steicke had access to substantial liquid assets, approximately $5 million, which were readily accessible and not contingent on the sale of other assets. This sum was significantly greater than the debts claimed by the creditors. The court concluded that while Ms. Steicke was solvent and could pay her debts, she was unwilling to do so, fitting the description of being "able but not willing" to pay her debts. Therefore, the court dismissed the creditors' petition for a sequestration order, ruling that Ms. Steicke was not insolvent.
The court's decision was based on the clear evidence of Ms. Steicke's substantial liquid assets and her demonstrated ability to access these funds. The court found that the petitioner had not sufficiently established the necessary grounds for a sequestration order. The dismissal of the petition was thus ordered, recognising Ms. Steicke's financial capacity to meet her obligations but her unwillingness to do so.
The primary legal issue for the court was to determine whether Ms. Steicke's ability to pay her debts could be assessed during a limited hearing based on affidavits alone. The court had to consider whether Ms. Steicke was genuinely insolvent or merely unwilling to pay her debts. The petitioner argued that given Ms. Steicke's significant assets, including cash and property, she was solvent and capable of paying her debts. Conversely, Ms. Steicke maintained that her financial situation, while solvent, did not compel her to liquidate her assets to meet her obligations.
The court found that the evidence demonstrated Ms. Steicke had access to substantial liquid assets, approximately $5 million, which were readily accessible and not contingent on the sale of other assets. This sum was significantly greater than the debts claimed by the creditors. The court concluded that while Ms. Steicke was solvent and could pay her debts, she was unwilling to do so, fitting the description of being "able but not willing" to pay her debts. Therefore, the court dismissed the creditors' petition for a sequestration order, ruling that Ms. Steicke was not insolvent.
The court's decision was based on the clear evidence of Ms. Steicke's substantial liquid assets and her demonstrated ability to access these funds. The court found that the petitioner had not sufficiently established the necessary grounds for a sequestration order. The dismissal of the petition was thus ordered, recognising Ms. Steicke's financial capacity to meet her obligations but her unwillingness to do so.
Orders
Orders of the court
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Background
Background to the litigation
In resolving this preliminary issue, it is necessary for the court to traverse events arising from court proceedings of Jardycian proportions, which have taken place over almost twenty years and consumed literally millions of dollars and seen the involvement of scores of lawyers. There have also been related proceedings as to the taxation of costs. It is, indeed, a tangled skein.BACKGROUND The petitioning creditor is Pederick Lawyers Pty Ltd,[2] an incorporated firm of solicitors. The petition is supported by two other creditors – Charlton Rowley Pty Ltd (in liquidation), also a firm of solicitors; and John Charlton Rowley, who provided a guarantee to Charlton Rowley Pty Ltd, in respect of monies advanced to the firm, by a last resort lender. [2] Hereinafter referred to as “Pedericks”. The relevant debtor named in the petition is Elisabeth Steicke (“the respondent”). She engaged Pederick Lawyers and Charlton Rowley to provide her with various legal services between April 2008 to mid-January 2011 (Pederick) and November 2017 and February 2020 (Charlton Rowley). Pedericks were Ms Steicke’s solicitor in family law proceedings. Charlton Rowley, whose proprietor at relevant times was Luke Rowley,[3] was instructed by Ms Steicke, in the main, to defend various proceedings brought against her by firms of solicitors, including Pedericks, in respect of fees alleged to be owed by her to them, including in subsequent taxation proceedings.[3] Hereinafter referred to as “Mr Luke Rowley”. As will be detailed in due course, these various proceedings were voluminous in nature, protracted and extraordinarily contested and so eye wateringly expensive. They arose primarily from family law proceedings, involving Ms Steicke and her former husband, David Steicke, which took place between 2005 and 23 November 2016, when Cronin J made final orders in them. Charlton Rowley went into voluntary liquidation in August of 2022. Between November 2017 and March 2018, Mr Luke Rowley retained a barrister, Ms Eriksen to provide him and Ms Steicke with advice in respect of taxation issues. Ms Eriksen rendered a bill to Mr Luke Rowley in an amount of $39,406,36. When the account was not paid, Ms Eriksen made a complaint to the relevant solicitors’ disciplinary body in respect of the unpaid fees. Ultimately, in October of 2018, Mr Luke Rowley borrowed the funds required to satisfy the debt to Ms Eriksen (and so resolve her compliant against him) from Frank Borg, who trades as Frank Borg Pawnbroking, at a rate 120% over 90 days. At the time, it would seem to have been his expectation that he could exercise a fruits of litigation lien over monies to be paid by Ms Steicke, in the sum of $2m, as a part settlement of her litigation with her former husband. Ms Steicke applied to the court to have the sum paid directly to her and was successful in her application. Charlton Rowley applied to intervene in these proceedings (as did Pedricks). However, their opposition to the application seems to have been unsuccessful.
Evidence
Evidence Before The Court
Ms Pederick has deposed that this sum is sought from Ms Steicke and does represent untaxed costs which have not been agreed. She further deposes that she can provide an updated summary of the amounts, if required. I do not believe that this has been done. In any event, it remains Ms Steicke’s position that her level of cash and other asset backing are such that she is able to pay all the monies claimed by the petitioner, if she was inclined to do so.MS STEICKE’S EVIDENCE REGARDING OTHER DEBTS In her affidavit material, Ms Steicke has acknowledged that she has other debts, which relate to unpaid legal fees. These include her former solicitors in Brisbane, McInnis Wilson. She has retained Dipal Prasad, a solicitor and costs consultant, to file objections to fees claimed from her by McInnis Wilson. The fees in question are approximately $200,000.00 and a taxation has commenced. As noted in the extract above, following Pedericks’ withdrawal from acting for her, Ms Steicke retained a solicitor in Melbourne to act on her behalf. He was Michael Winter. Mr Gretsas has recently provided an affidavit in respect of Ms Steicke’s potential exposure to Mr Winter for legal costs. Mr Gretsas has deposed that he is acting for Ms Steicke in taxation proceedings, in the Supreme Court of South Australia against Mr Winter. Initially, Mr Winter filed a bill of costs, in taxable form, claiming fees due to him of $1,973,598.16. However, Mr Gretsas has deposed that Mr Winter has withdrawn claims for approximately $1.5 million leaving a potential liability for Ms Steicke of $419,082.34. Ms Steicke herself has provided evidence, which indicates some level of complexity regarding Mr Winter’s professional situation. It is Ms Steicke's position that he breached his obligation of trust towards her and withdrew monies held on trust, on her behalf, without rendering accounts. As a consequence, Mr Winter was subject to 8 charges of professional misconduct brought against him by the Victorian Legal Services Commissioner. The record of the Victorian Civil and Administrative Tribunal, provided by Ms Steicke indicates that Mr Winter acknowledged each of the counts of professional misconduct made against him and was reprimanded by the relevant Commissioner. In addition, Ms Steicke has deposed that she has instructed Mr Gretsas to file a writ in the Supreme Court of Victoria claiming damages from Mr Winter for breach of fiduciary duty and negligence in the conduct of her case. The writ was filed on 15 November 2021 but has been delayed by Ms Steicke’s failure to provide a statement of claim as yet. In all these circumstances, it is Ms Steicke’s position that the maximum amount, to which she may be liable to Mr Winter and McInnis Wilson, for unpaid legal fees, is in the vicinity of $600,000.00. However, given the various taxation and related proceedings, she is of the view that her liability is likely to be significantly less. As noted above, Ms Steicke asserts that the interest claimed against her in the relevant bankruptcy notice is incorrect. In this context, Mr Gretsas has retained an accountant, Taiseer Sayeed, on her behalf, to calculate what is the correct rate of interest, according to the applicable rules of court. Mr Sayeed opines it is approximately $24,000.00 less than the amount claimed.
Decision
Reasons for decision
As such, it is a sum that is readily accessible to be the focus of garnishment proceedings in a state court. The same can be said of the Skye property, which can also be subject to execution. In these circumstances, Mr Gretsas submits that it is the position that his client is clearly a person of very considerable means and, as a consequence, the means of execution available to the petitioner in either the District Court or the Supreme Court of South Australia cannot be regarded as sterile in their application to Ms Steicke. In Mr Gretsas’ pithy aphorism, in insolvency, cash is king.CONCLUSIONS The major issue which falls to be determined in any application for sequestration is whether the debtor concerned is able to pay his or her debts. In this particular matter, the question for the court is whether this an issue which can be determined, in practical and fair terms, in the context of a limited hearing confined to the affidavits filed. In my view, it can be so determined. The bankruptcy notice identifies a debt of over $500,000.00 but with an additional exposure, for untaxed legal fees of up to $1.8m The supporting creditors seek a little less than $400,000.00. Other legal fees owed by Ms Steicke are in excess of $600,000.00. I acknowledge that these are significant sums. However, the evidence indicates Ms Steicke has access to $5m in cash. She has explained how this sum was derived. It is not borrowed. It does not depend on the realization of potential valuable assets depending on the vagaries of the market as was the case with the two gold Caulfield Cups and the Patek Phillipe wristwatch in Foyster. [30][30] ANZ Banking Group v Foyster (supra) at 29] – [34]. It is a sum which is immediately accessible to her. No process is required to realise it and no other person’s interests would be affected. In my view, it is axiomatic that she could clear all her current debts but is disinclined to do so. As such, she is not insolvent. Rather, in my assessment, she fits the description of being able but not willing to pay the relevant debts. I acknowledge that this is a set of circumstances which must be examined within the parameters of a more nuanced examination of Ms Steicke’s financial circumstances. The chief lacuna in this regard is that she has not provided any form of budget. It is clear that she is not formally employed. The effect of her evidence is that the major focus of her life is on caring for Samuel, which she does with the financial assistance of her former husband, who continues to generate an exceptional level of income from his various endeavours. In my view, what is striking about this evidence is that, since Ms Steicke received the property to which she was entitled as a consequence of the orders made by Cronin J in November of 2017, there is no evidence that she has been compelled to realise property to support herself financially. It would appear to be the case that the $2m cash settlement and the proceeds of sale of Somerton Park remain essentially intact.
Ratio Decidendi
Legal Principle Established
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