Pederick Lawyers Pty Ltd v Steicke
[2025] FedCFamC2G 275
•28 February 2025
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
Ryan v Primesafe [2015] FCA 8
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
Webster v Lampard (1993) 177 CLR 598
Welsh v Digilin Pty Ltd [2008] FCAFC 149
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 filed 3 June 2024 be dismissed.
2.No orders as to costs are to be made.
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 reasons for judgment relate to an application for summary dismissal of a creditor’s petition for bankruptcy.
It is the position of the relevant debtor that it is axiomatic, from the evidence provided by her to the court, particularly a document from her bank dated 19 February 2025, which indicates cash holdings of $5m, that she is solvent and therefore the petitioning creditor has no reasonable prospect of securing a sequestration of her estate, given the sums sought in the bankruptcy notice on which the petition is based.
On the other hand, the petitioning creditor has sought to cross-examine the debtor concerned, if she continues to oppose its petition. In the absence of such evidence, it contends that there are serious issues of both fact and law, which can only be resolved at a trial of the issues raised by it and therefore the summary dismissal application should be dismissed, and the hearing of the petition proceed.
The relevant debtor does not argue that the petitioning creditor does not hold two judgment debts against her, which were secured in the District Court of South Australia on 30 January 2020, in an amount of $267,713.00 together with interest of $107,114.57 and in the Supreme Court of South Australia on 27 August 2019, in a further amount of $45,000.00, which resulted in the issue of a bankruptcy notice against her, on 15 November 2023 in an amount of $516,067.27, which remains unsatisfied.
In addition, she does not dispute that she has other actual creditors, including at least one other judgment debt, obtained in the Magistrates Court of South Australia, on 3 February 2020, in an amount of $87,019.05 and other potential claims against her in an amount of $177,874.05; $298,616.43 plus interest of $39,406.36 accruing interest at further rate of 10% per month.
It is also accepted on her behalf that there may be other creditors who will seek repayment of monies said to be owed by her. As will be outlined in greater detail, all these debts relate to the debtor’s involvement in long-running family law proceedings and associated proceedings relating to her contention that she had been over-charged by various lawyers and professional people, whom she had retained to advise and represent her.
In all these circumstances, counsel for the debtor has calculated that her worst-case scenario in respect of her exposure to debt, is that she owes approximately $3m, which is necessarily far short of her liquid assets of $5m and other real property which she either owns outright or beneficially with her former husband.
However, as will be expanded upon, in due course, the respondent does not accept that she is indeed liable for all these sums. It is her position that the amounts of interest claimed are incorrectly calculated and, more significantly, she has valid counterclaims against all her actual and potential creditors.
In addition, it is the debtor’s case that she owns real estate to the value of a further $8.8m. As a consequence of this asset backing, her solicitor and counsel, Mr Gretsas, has described her as a very wealthy woman. In these circumstances, although he concedes that his client may be described as being recalcitrant in regard to the payment of her debts, it cannot be said she is insolvent.
As a consequence, it is Mr Gretsas’ primary submission that the provisions of the Bankruptcy Act 1966 (Cth) [1] can have no application to this situation. Rather, if any of the creditors concerned, either those holding actual judgment debts or those seeking payment, wish to pursue their alleged debts, they should do so pursuant to other legal remedies available to them pursuant to South Australian legislation, primarily the Enforcement of Judgments Act 1991 (SA).
[1] Hereinafter referred to as “the Act”.
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.
Mr John Rowley is Mr Luke Rowley’s father. He had provided a guarantee in respect of the monies borrowed by his son from Mr Borg. The guarantee was secured by real property owned by the Rowleys, which was sold in late 2023. A sum of $298,616.43 was directed to Mr Borg to satisfy his debt.
It is Mr John Rowley’s position that Ms Steicke owes this sum to him, as it relates to the monies she owes Ms Eriksen. As a result, he has sought to intervene in the bankruptcy proceedings as a supporting creditor.
Mr Luke Rowley has deposed to having provided a variety of legal services to Ms Steicke from November 2017 onwards, whilst practising as Charlton Rowley. He sent her invoices in an amount of $83,464.05, which were not paid.
As a result, proceedings were commenced against her in the Magistrates Court of South Australia on 19 December 2019, which were not defended. On 3 February 2020, judgment was entered against Ms Steicke in an amount of $87,019.05.
In addition, Mr Luke Rowley has deposed that his former firm is owed for work in progress, undertaken for Ms Steicke, but not as yet billed and for work performed by Mr Gretsas, in an amount of $177,874.05, whom he instructed as counsel for her in some of the relevant proceedings. He understands the liquidator will be pursuing these sums.
However, the main focus, in the proceedings before me, has been on the judgment debts granted in favour of Pedricks and which stem from Ms Steicke’s long-running and convoluted family law proceedings. As noted above, Pedricks, through its principal, Dimitra Pedrick were the solicitors for Ms Steicke for a period of around 33 months.
A copy of the costs agreement between Pedericks and Ms Steicke has been provided. Ms Pederick was entitled to charge at $375.00 per hour and to charge further fees for the preparation of documents and correspondence. Other members of her staff could be charged out at lesser rates.
The proceedings between Ms Steicke and Mr Steicke related both to the settlement of matrimonial property issues but also parenting arrangements in respect of their only child, Samuel, who turned 18 in June 2014. I have been provided with a copy of the relevant judgment.[4]
[4] See Exhibit ES 5 to the affidavit of Elizabeth Steicke filed 16 July 2024.
In the judgment Cronin J indicated that the court record showed that the family proceedings had involved innumerable hearings and over 700 filed documents. Ms Steicke herself had engaged the services of fifteen different firms of solicitors. As noted above, Pedricks were her solicitors for the period between April 2008 and January 2011.
However, ultimately, on 23 November 2017, Cronin J determined the parties’ competing applications, in the absence of Ms Steicke, on an undefended basis, as she had not filed her affidavit material for trial.[5] It needs to be pointed out that Ms Steicke was not unrepresented, at this stage. Rather Charlton Rowley had instructed senior counsel to adjourn the trial on the basis that Ms Steicke was unwell. This application was refused.
[5] See Steicke & Steicke [2017] FamCA 76.
It is necessary to outline some of the significant findings made by Cronin J in point form:
·The parties married in 1994, after having met in 1988;
·The parties separated in 2005;
·Samuel is their only child. He has special needs and requires expensive care. He is cared for by the wife and has been since separation but with very significant financial support provided by the husband;
·The husband has qualifications in mathematics and physics. In 1990, he and others devised a gambling system, which was extremely successful and enabled the parties to live a lavish lifestyle;
·There had been significant legal proceedings between the parties, involving numerous lawyers, from 2005 onwards. These proceedings had centred on:
·Spousal maintenance issues and discovery. It being the wife’s case that the husband had not disclosed all his assets to her. She had asserted that Mr Steicke had secreted some $142m offshore.
·The wife had spent $20m on her legal fees;
·The husband had spent $15m. In this context, Cronin J accepted that the parties’ combined level of spending, on legal fees, was $35m;
·Significant transfers had been made to the wife prior to the final hearing but most of these sums had been spent on her legal fees;
·Due to his accumulated wealth and his interest in the gambling systems, the husband’s financial future was secure and he would continue to lead the lavish lifestyle he had hitherto enjoyed;
·The husband had provided a sum of approximately $70,000.00 per week in respect of the support of Samuel, which included the provision of organically grown food; naturopath support, carers, a chef, security guards and other services and was likely to continue to do so.
·In the form of a property at Hill Street, North Adelaide, the parties owned assets to the value of $2.5m;
·The parties’ other assets, including those controlled by a trust, were valued at around $46m;
·Any assessment of contributions, made during the marriage, favoured the husband, as it was his mathematical acumen, which had generated this wealth:
·Some adjustment needed to be made in favour of the wife, pursuant to section 75(2) because the husband would be able to be continuing building on his capital base, whereas it was unlikely the wife would be similarly placed;
·The husband’s proposal that the wife receive $9.9m (around 20% of the pool) was not a just and equitable outcome;
·The wife should receive $11.6m in assets composed of the following:
·$2m in cash;
·1D Williams Street, Burnside;
·14 Chisholm Avenue, Burnside;
·14 – 14A Esplanade, Somerton Park;
·83 Hill Street, North Adelaide;
·42 – 44 Coach Road, Skye.
·In order to achieve this outcome, the husband was to transfer his interest in each of these real properties on or before 31 January 2018.
It should also be noted that Cronin J found the manner in which Ms Steicke had approached the litigation to be perplexing and was not always diligently pursued by her. He also accepted that she had felt let down by her many lawyers.
As noted above, the $2m was paid. The properties at Summerton Park and Skye were also transferred to Ms Steicke. Mr Steicke has executed transfers in respect of the three other properties, but these transfers have not been registered. Ms Steicke has deposed that this is because she and Mr Steicke have an agreement that he will pay the outgoings in respect of these properties.
No reference is made in the judgment to Ms Steicke’s own income or to what she had or had not deposed in any statement of financial circumstances filed on her behalf. It is, however, clear that up to the final hearing she had received several million dollars in spousal maintenance and interim and partial property settlement orders.
In the current proceedings, Ms Steicke has deposed as follows:
As part of my former husband’s agreement with me he continues to completely financially support our son Samuel to the tune of several million dollars per year … the payments are undertaken by Ward Street Nominees Pty Ltd. The payments commenced many years before the trial of the Family Court proceedings in November of 2017 and have continued to date.[6]
[6] See affidavit of Ms Steicke filed 16 July 2024 at [28].
Ms Steicke has expressed her dissatisfaction with the legal services provided to her by Pedericks and, notwithstanding the fact that they withdrew from acting for her in early 2011, blames them for the fact that she was not able to prepare evidence for the 2017 final hearing. She further asserts that Pedericks retain control of 439 boxes of documents which are of seminal importance to her case, which are stored in a commercial storage facility.
Ms Steicke was dissatisfied with the orders of Cronin J being of the view that the pool of property as calculated by him did not represent the husband’s actual wealth. However, an appeal to the Full Court was unsuccessful and special leave to appeal to the High Court was refused.
Ms Steicke and Ms Pederick disagree about why the professional relationship between them broke down. The latter asserting that Ms Steicke was recalcitrant in providing proper instructions to her; the former that it was Ms Pederick who terminated the arrangement.
In 2016, these controversies came to a head in respect of Ms Steicke gaining access to the 439 boxes of documents with Faulks DCJ determining that Pedericks retained a lien over the files until Pedericks’ costs were paid.[7]
[7] Pederick Lawyers v Steicke [2016].
As previously indicated, it is Ms Steicke view, which I am unable to confirm and which in any event is beyond the purview of these proceedings, that these boxes were central to her establishing the great wealth of Mr Steicke and her inability to access them hamstrung her in the proceedings before Cronin J and afterwards.
It is common ground between the parties in the current proceedings that Ms Steicke had applied to the Supreme Court of South Australia, pursuant to the provisions of the Legal Practitioners Act 1981 (SA) to have both Pedericks’ retainer set aside and to have the firms bill of costs taxed. She has been unsuccessful in both applications.
Relevant judgments and orders of the Supreme Court indicate that the taxation proceedings were characterised by over 35 interlocutory hearings; Ms Steicke being represented by at least 10 different firms of solicitors; and what was characterised by the judicial office presiding Master Dart as an on-going failure to particularise any complaints or support them with any detailed explanation. The taxation proceedings were commenced in March of 2014. In this context, Ms Steicke apparently applied to have the matter referred to mediation, whilst Pedericks wished to have the application struck out for want of proper prosecution and also as an abuse of process.
Mr Rowley was apparently acting for Ms Pederick during relevant portions of these proceedings, including on 28 February 2018, when a consent order was made of which Ms Steicke has subsequently been critical in these proceedings.
Essentially, it was agreed on that date that, within a period of six weeks, Ms Steicke would provide particulars of all her objections to the various bills submitted to her and, if she did not do so, her application for taxation would be struck out.
It was in this context, Mr Rowley apparently retained Ms Eriksen to provide the necessary objections. However, she apparently advised that it would be impossible to do so within the six week timeframe provided, as a period of around 1½ years would be required.
In these circumstances, the self-executing consent order took effect and Ms Steicke’s taxation application was struck out. Ms Steicke would seem to be critical of Mr Rowley for ostensibly agreeing to these orders without making inquiries as to their underlying logistical sustainability.
An appeal to the Full Court of the Supreme Court of South Australia was unsuccessful. In its judgment the Full Court provided the following background:
During the time that the applicant was represented by the respondents, the applicant was provided with regular itemised monthly invoices. The applicant did not dispute any of the respondents’ invoices during the period the respondents were retained, and the applicant paid to the respondents the majority of the fees and disbursements incurred. However, the respondents at times effectively carried the applicant without payment for periods of up to nine months …
After the respondents’ termination of their retainer, the applicant’s then solicitor, Mr Winter, first floated an issue with the respondents’ fees, although at that time Mr Winter said he still expected the respondents’ outstanding accounts would be paid. On 12 April 2011, Mr Winter told the respondents that he was instructed to tax the fees but nothing eventuated from this. Between 22 June 2011 and 3 December 2012, the issue of taxation of the respondents’ fees was raised on various occasions in correspondence between the parties, however no further particularisation was forthcoming.
…
It was not disputed by the respondent that of the approximately $3 million in fees and disbursements charged by the respondent, most have been paid by the applicant and that the Originating Application therefore related to, for the most part, costs already paid. However, the respondents had separately commenced proceedings in the District Court for recovery of unpaid costs and had also commenced an action in the Family Court claiming a lien over its files.
…
The respondents alleged that the Court should infer that the filing of the Originating Application was an attempt to procure an adjournment of the Family Court trial. The respondents also contended that the applicant had repeatedly employed the tactic of changing solicitors to seek adjournments in the past. The Originating Application proceedings were not dismissed in 2016.[8]
[8] See Steicke v Pederick & Anor [2019] SASCFC 148 at [18] – [24].
It was during these protracted taxation proceedings that the two judgment debts on which the bankruptcy notice issued to Ms Steicke was based. On 30 January 2020 Pedericks were awarded costs in an amount of $267,713.08 together with interest in an amount of $107,114.57. Concurrently with this judgment debt, the Supreme Court of South Australia made an order charging Ms Steicke’s interest in the property located at 83 Hill Street, North Adelaide.
In her affidavit material, Ms Steicke has deposed that she believes that Pedericks claim she owes a further $1.8m in respect of monies owed to it in respect of legal services provided to her. She asserts that some of this sum represents untaxed claims for costs which have not been agreed.
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.
In the absence of rebutting evidence from the petitioning creditor, this is not an issue which I can resolve in the context of the current summary dismissal proceedings.
MORE RECENT DEVELOPMENTS
On 19 February 2025, Ms Steicke filed a further affidavit, in which she updated her financial position. In this context, she deposed that she sold the Somerton Park property, which was awarded to her by Cronin J in the concluded family law proceedings, for the sum of $4,000,000.00.
A portion of this sale price, together with the $2,000,000.00 received by her from Mr Steicke, is the source of the $5,000,000.00 held in an account, in her name at the Commonwealth Bank. As noted above, Ms Steicke has provided a statement from the bank to this effect.[9]
[9] See Exhibit ES-53 to the respondent’s affidavit filed 20 February 2025.
In addition, Ms Steicke has provided a valuation of the Skye property together with a current title certificate in respect of the property, which indicates that Ms Steicke is its sole registered proprietor, and it is unencumbered. As of December 2024, the property was valued at $2.2 million.
In addition, Ms Steicke has provided evidence regarding the value of Hill Street, North Adelaide and the two properties in Burnside. Although Ms Steicke characterises herself as the beneficial owner of the three properties concerned, she concedes that the North Adelaide property is jointly owned with Mr Steicke and the Burnside properties are jointly owned by her and by a company owned and controlled by Mr Steicke.
However, Ms Steicke has provided copies of relevant transfer documents executed by Mr Steicke transferring these properties to her, which Mr Gretsas holds in escrow, on her behalf. Valuations have also been provided in respect of these properties, which total $6.64 million.
In all these circumstances, Ms Steicke has deposed that she is solvent and can pay all my debts including the debts that are the subject of the applicant’s bankruptcy notice several times over by simply utilising my cash resources.[10]
[10] Ibid at [10].
In addition, Ms Steicke has deposed as to her dissatisfaction with the services provided to her by Pedericks and what she regards as their exorbitant fees, which have rendered her disinclined to pay the amount claimed in the bankruptcy notice.[11]
[11] See affidavit of the respondent filed 16 July 2024 at [17].
It is also Ms Steicke’s position that the issue of the bankruptcy notice should be characterised as an abuse of the court’s processes, as it has obviously been engaged as a mechanism to exert pressure on her to extract payment from her, when the creditor concerned (Pedericks), by virtue of the fact that it has acted on her behalf over several years and continues to hold her legal records, must be aware that she is an extraordinarily wealthy person.
More recently again, Ms Steicke has deposed that she intends to institute proceedings against Pedericks alleging civil fraud against it on the basis that she was overcharged significantly in respect of the legal services provided to her. A letter of demand, to this effect, has apparently been forwarded to Ms Pederick on 7 February 2025 by Professor Dion Accoto, a barrister who practices in Sydney. No such proceedings have been yet filed.
In summary, over the course of a period approaching twenty years, Ms Steicke has amply demonstrated that she is a determined, but at times erratic litigant, with apparent access to an extraordinary amount of money with which to fund her litigation and to whom legions of lawyers have attached, with midas-like enthusiasm, very often with baleful consequences.
At this point, given the letter of demand from Professor Accoto and the fact that Ms Steicke’s penchant for litigation apparently remains undiminished, I urged the parties to consider whether the current controversies between them could be consensually resolved, possibly through a process of mediation. This overture was not accepted.
For the reasons which follow, in my view, the focus of these reasons for judgment must be on Ms Steicke’s solvency and the appropriateness and justice of the bankruptcy legislation being applied to her circumstances. It cannot be on her past conduct as a litigant or on the extent of the monies, claimed against her for legal fees, either paid or contingent.
LEGAL PROVISIONS RELEVANT TO SUMMARY DISMISSAL
Section 143 of the FCFCOA Act grants the Court a discretion to grant summary judgment (either allowing a defence or dismissing a claim without hearing evidence) if it is;
Satisfied that the other party has no reasonable prospects of successfully defending or prosecuting the proceedings concerned.
However, in this context, section 143(3) provides the admonition that a case need not be hopeless or bound to fail to have no reasonable prospects of success. Section 143 is in similar terms to section 31A of the Federal Court Act 1976 (Cth).
In this context, the court is conferred with a discretion, pursuant to rule 13.13 of the Rules to summarily dismiss an application if satisfied that the relevant proceedings have no reasonable prospects of success and, significantly, so far as the current matter is concerned, the proceedings can be characterised as being frivolous or vexatious; or an abuse of process.
The power provided by section 143(3) should be read in conjunction with section 30 of the Act, which sets out the general powers of the court in bankruptcy proceedings. The section provides the court with full power to decide all questions of law and fact coming before it; as well as to make any order which it considers necessary. Given the wide ambit of the section, I am satisfied that I have the required authority to determine the issue of the petition in this case on a summary basis.
As with all discretions, the discretion provided by rule 13.13 must be exercised judicially and according to the dictates of justice. At a fundamental level, the court has an obligation to investigate and determine any claim for judicial relief, which has been honestly made in the proceedings before it, by the suitor concerned. The power to dismiss an application summarily has been frequently described as being one which is to be invoked sparingly even in cases which can be characterised as being inherently weak.
On the other hand, the court retains the authority to bring proceedings to an end prematurely if such proceedings would amount to an abuse of process or their prolongation would clearly inflict unnecessary injustice upon the opposite party.[12] These two considerations must be carefully balanced against one another in any application for summary dismissal bearing in mind the potentially significant implications for any party who will be the subject of such an order.
[12] Welsh v Digilin Pty Ltd [2008] FCAFC 149 at [32] (Tamberlin, Greenwood and Collier JJ).
The provision of section 143 of the FCFCOA Act is directed towards the expeditious disposal of unmeritorious proceedings and a concomitant saving of costs to the parties and Court resources. However, laudable those aims are, the court must be careful to avoid becoming a slave to expediency.
Division 2 of the Federal Circuit and Family Court is a busy court of first instance. Part of its raison d’être is to facilitate the just resolution of disputes as quickly, inexpensively and efficiently as possible.[13] This is described, in the relevant legislation, as the overarching purpose of case management provisions.
[13] Federal Circuit and Family Court of Australia of Australia Act 2021 (Cth) at section 190(1).
In Spencer v Commonwealth of Australia, French CJ and Gummow J said of section 31A of the Federal Court Act 1976 (Cth) that it:
[A]uthorises summary disposition of proceedings on a variety of bases under its general rubric. It will apply to the case in which the pleadings disclose no reasonable cause of action and their deficiency is incurable. It will include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment. It will include the class of case in the longstanding category of cases which are "frivolous or vexatious or an abuse of process". The application of s 31A is not, in terms, limited to those categories.[14]
[14] Spencer v Commonwealth of Australia (2010) 241 CLR 118, 131 [22] (French CJ and Gummow J).
In Webster v Lampard, the High Court said as follows:
The power to order summary judgment must be exercised with “exceptional caution” … and “should never be exercised unless it is clear that there is no real question to be tried”.[15]
[15] Webster v Lampard (1993) 177 CLR 598, 602 (Mason CJ, Deane and Dawson JJ).
In Lindon v Commonwealth of Australia (No 2),[16] Kirby J provided a list of principles applicable to summary judgment:
•It is a serious matter to deprive a party of access to the courts and the power to do so should be rarely and sparingly used;
•The party seeking summary dismissal must show that it is clear on the face of the other party’s documents that the other party lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious;
•That a case appears weak and unlikely to succeed is of itself not sufficient to satisfy summary dismissal;
•If there is a serious legal question to be tried, then it should ordinarily be determined at a trial of the issues;
•Where, notwithstanding a defect in the pleadings, if it appears that a party may have a reasonable cause of action which has not been put in proper form, a Court will ordinarily allow that party to reframe the pleadings; and
•The “guiding principle” is doing what is just.
[16] Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 at 256 (Kirby J).
Kirby J said further in Lindon:
If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the Court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit.
In Przybylowski v Australian Human Rights Commission (No 2), Perry J considered that section 31A of the Federal Court Act 1976 (Cth) set a lower threshold than previous tests for summary dismissal, which required cases to be manifestly groundless or hopeless before they warranted dismissal.[17]
[17] Przybylowski v Australian Human Rights Commission (No 2) [2018] FCA 473 at [7] (Perry J).
Whilst bearing in mind the need for caution, her Honour indicated that the exercise of discretion under section 31A of the Federal Court Act 1976 (Cth) involved the making of value judgments in the absence of a full and complete factual matrix and argument.
In this context, Perry J endorsed the following comments of Reeves J in Australian Securities and Investment Commission v Cassimatis:
[T]he determination of a summary dismissal application therefore does not require a mini-trial based upon incomplete evidence to decide whether the proceedings are likely to succeed or fail at trial. Instead, it requires a critical examination of the available materials to determine whether there is a real question of law or fact that should be decided at trial. Each application for summary judgment or summary dismissal has to be determined according to its particular circumstances. What is required is a practical judgment of the case at hand. The relevant circumstances will partly depend upon the stage which the proceedings have reached. Among other things, this will affect the materials available to the Court considering the application, for example, whether pleadings have been exchanged, or discovery of documents has occurred.[18]
[18] See Australian Securities and Investment Commission v Cassimatis (2013) 220 FCR 256, 271 [46] (Reeves J).
In exercising this practical judgment, a demonstration that an aspect of a case that relied on the establishment of a question of fact that is fanciful, trifling, implausible, improbable, tenuous, or contradicted by all available documents or evidence was likely to be central in whether that case should be summarily dismissed. To the contrary, a case which raised a real question of fact of a substantial, plausible or weighty nature should not be so dismissed.
Justice Perry further summarised the principles applicable to the entry of summary dismissal pursuant to the statute in Riva NSW Ltd v Official Trustee in Bankruptcy in the following terms:
·The moving party bears the onus of persuading the court that the application has no reasonable prospects of succeeding;
·The effect of provisions such as that contained in section 31A is to lower the bar. It is not necessary to establish that an action is manifestly groundless or hopeless for a proceeding to be summarily dismissed;
·An assessment of whether a proceeding has no reasonable prospects of success necessitates the making of value judgments in the absence of a full and complete factual matrix and argument, with the result that the provision vests a discretion in the Court;
·This discretion may include whether to deal with the motion at once or at some later stage in the proceedings when the legal and factual issues have been more clearly defined;
·Although the threshold for summary dismissal has been lowered, the discretion must nonetheless still be exercised with caution;
·In this context, it was noted that the discretion was concerned with the bringing and defending of proceedings, not just with pleadings; with substance, not just with form;
·A mini-trial is not required. However, there must be a critical examination of relevant material to determine whether there is a real question of fact or law to be determined. As such each application for summary dismissal must be determined on its particular circumstances;
·The exercise involved is one of practical judgment, which will be influenced by the stage the proceedings have reached and the amount of material available to the court;
·In applying these principles:
[T]he moving party is more likely to succeed if she or he demonstrates that the applicant’s success relies on a question of fact that is fanciful, trifling, implausible, improbable, tenuous or contradicted by all the available documents or evidence. Conversely … as a general principle, such an application is unlikely to succeed where, on a critical examination of all the available materials, the Court is satisfied that there appears to be a real question of fact to be determined. The latter … is more likely to be the case where the available materials include pleadings that raise factual disputes that can truly be described as significant, substantial, plausible or weighty.
·In conclusion, the inquiry required is whether there is a reasonable prospect of prosecuting the proceeding, not an enquiry directed to whether a certain and concluded determination can be made that the proceeding would necessarily fail. [19]
[19] Riva NSW Ltd v Official Trustee in Bankruptcy [2017] FCA 188 at [45]-[50] (Perry J).
It is the position of Mr Gretsas that, given his calculation of the maximum extent of Ms Steicke’s potential debts, when contrasted with what he would characterise as the irrefutable evidence of her liquid resources, this is a case where the court can make the required value judgments in the absence of any extensive examination of Ms Steicke to reach the conclusion that Pedericks have no reasonable prospects of being successful in prosecuting the petition filed on its behalf.
Further he contends that relevant authority, from the Full Court of the Federal Court, which binds this court, is to the effect that the court should exercise it discretion in respect of making a sequestration order in circumstances where a creditor has demonstrated solvency but is disinclined to pay the relevant debt.
Essentially, Mr Gretsas submits that the court has sufficient material before it to make the required practical judgment as to whether there are real questions of fact or law, which can only be determined at trial, including whether Ms Steicke should be subject to cross-examination.
As will be detailed in due course, it is Mr Thomas’ submission that the court is not at such a point as yet, given the fact that his client has evidence which establishes an unsatisfied bankruptcy notice. As such, it is premature to summarily dismiss the petition.
Whilst conceding that his client may well have other options to pursue to recover this debt, it is his position that, at this stage, given the state of the evidence currently available to the court, which is untested, it remains a very real possibility that such alternative interventions will prove to be sterile in their operation, when contrasted with the mechanisms provided by the Bankruptcy Act.
In this context, I will turn to the relevant principles arising under the Act and attempt to analyse the case law applicable to them.
LEGAL PRINCIPLES APPLICABLE
The court’s jurisdiction to make a sequestration order is founded in section 43(1) of the Bankruptcy Act 1966 (Cth). It depends upon the petitioning creditor establishing the commission of an act of bankruptcy by the debtor concerned.
In addition, the section provides a number of other conditions which must be satisfied which include residence in Australia, at the time of the commission of the act of bankruptcy. It is also clear that the authority to make a sequestration order is discretionary in nature.
Section 40 provides an exhaustive list of circumstances which constitute an act of bankruptcy. Of particular relevance in the following matter, is section 40(1)(g) which provides as follows:
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia--within the time specified in the notice; or
(ii) where the notice was served elsewhere--within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;[20]
[20] See Bankruptcy Act 1966 (Cth) s 40(1)(g).
The power granted to the Official Receiver, to issue bankruptcy notices, arises pursuant to section 41(1)(a) of the Act, which reads as follows:
(1) An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:
(a) a final judgment or final order that:
(i) is of the kind described in paragraph 40(1)(g); and
(ii) is for an amount of at least the statutory minimum’
At relevant times, the statutory minimum was $10,000.00.
Given these provisions, Ms Steicke has not sought to challenge the probity of the bankruptcy notice served upon her. It is also apparent that the notice remains unsatisfied. In these circumstances, section 52(1) of the Act is engaged, which is in the following terms:
(1) 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.
It is clear from the use of the word may in section 52(1) that the court’s authority to make a sequestration order is discretionary. It is also subject to the considerations contained in section 52(2), which reads as follows:
If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b)that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
However, the onus is on the debtor concerned to establish that any other sufficient cause exists justifying that a sequestration order should not be made, if it is established that an act of bankruptcy has occurred. As was said in Deputy Commissioner of Taxation v Bayeh[21] the onus to establish other sufficient cause rests as a matter of form and substance upon the debtor.
[21] Deputy Commissioner of Taxation v Bayeh (1999) 100 FCR 144 at [12].
Although the Bankruptcy Act is concerned with issues of personal insolvency, it does not utilise such terminology, speaking rather of the ability to pay debts. The High Court, in Sandell v Porter,[22] provided the following elaboration on what is meant by the phrase:
Insolvency is expressed in s. 95 as an inability to pay debts as they fall due out of the debtor's own money. But the debtor's own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time - relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor's inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency. Whether that state of his affairs has arrived is a question for the Court and not one as to which expert evidence may be given in terms though no doubt experts may speak as to the likelihood of any of the debtor's assets or capacities yielding ready cash in sufficient time to meet the debts as they fall due
[22] Sandell v Porter (1966) 115 CLR 666 at 670 per Barwick CJ.
Accordingly, it would seem to me to be that the relevant test as to the ability of a person to pay one’s debts requires the court to ascertain whether the debtor concerned is able to pay his or her debts from cash or realisable assets within a relatively short period - relative to the size and amount of the debts and to the circumstances, including the nature of the business, of the debtor.
In other words, what is required is for the court to look at the objective fiscal circumstances of the debtor concerned. Significantly, insolvency is concerned with an assessment of a person’s capacity to pay all debt, with a level of expediency appropriate in the circumstances.
In the current matter, the central legal and evidentiary issue is whether the court should exercise its discretion not to sequester Ms Steicke’s estate on the basis that she is able to pay her debts, as they fall due. In this context, it is incontrovertible that Ms Steicke has not paid a significant component of her debts related to legal expenditure as she is not willing to do so, despite the fact that she has access to a source of cash significantly more than those debts.
The onus is on Ms Steicke to establish that she is solvent and the relevant time for that is the time of hearing. As noted above, Ms Steicke is not currently willing to pay the debt she has been adjudged to owe the petitioning creditor. This is the central legal issue in the case. Both Mr Gretsas and Mr Thomas, counsel for Pedericks, characterise Ms Steicke as a recalcitrant debtor.
In Re Sarina; Ex parte Wollondilly Shire Council[23] the Full Court of the Federal Court was required to determine whether the expression able to pay one’s debts should be construed as willing and able to pay one’s debts. It concluded that it should not.
[23] Re Sarina; Ex parte Wollondilly Shire Council (1980) 48 FLR 372.
The reasoning provided for this determination related to the fundamental nature of bankruptcy itself, which had the following consequences:
·Upon bankruptcy, all the bankrupt’s property vested in the trustee appointed, not merely property sufficient to pay the debt on which the bankruptcy was founded.
·Thus, a creditor’s right to sue the debtor personally was converted into a right to present a proof of debt to the trustee appointed, which could be rated against any other proofs presented so that a bankrupt’s estate could be fairly and equitably distributed between all creditors and one would not have an advantage by suing first.
·Bankruptcy had the effect of precluding the bankrupt from holding office and had quasi-penal consequences.
·Ultimate discharge from bankruptcy had the effect of releasing the bankrupt from any remaining debts.
·As a consequence of these matters, the effect of bankruptcy was to fundamentally change the status and standing of the person concerned along with the totality of their property and a priori was a matter of some significance.
In these circumstances, the Full Court held as follows:
These considerations negate the existence of any policy underlying the Act that a debtor should be made bankrupt if he is able to pay his debts but is unwilling to do so. If a debtor is able to pay his debts but is recalcitrant, his creditors may resort to the remedies otherwise afforded by the law such as execution against his property and garnishee proceedings. The words "able to pay his debts" in s. 52 (2) of the Act do not mean "willing and able" to do so.[24]
[24] Ibid at 376.
These were issues to which the Full Court returned to in the more recent case of Culleton v Balwyn Nominees Pty Ltd.[25] Reaffirming the special nature of bankruptcy proceedings, which deal not only with the private rights and obligations of debtors and creditors, but also the public’s interests in ensuring the proper administration of insolvent estates, which have the consequence of change in the status of a bankrupt person.
[25] Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8.
As such, the question of solvency and its implications for the community as a whole, were categorised as being central to the bankruptcy jurisdiction. In this context, the Full Court endorsed Re Sarina and confirmed that the use of sequestration was inappropriate in a case of a person who was otherwise solvent but refused to pay a judgment debt entered against him.
In Culleton the Full Court said as follows:
Re Sarina demonstrates the centrality of the question of solvency to the jurisdiction of bankruptcy. Whilst one must recognise the permissive “may” in s52(2), the circumstances where a sequestration order would be made if the debtor satisfied the Court of his or her solvency are difficult to imagine. Proof of solvency may not necessitate dismissal of the petition; an adjournment may be the appropriate course.
Whilst it is legitimate for a creditor to proceed in bankruptcy for the purpose of recovering a debt that does not mean that bankruptcy should be viewed in its essential character as part of the process of execution of judgment debts. It is the changing of the status of an insolvent person: A sequestration order, as demonstrated by Re Sarina, will not be made against the estate of someone who refuses to pay a debt if that person can prove (the onus being on him or her) that he or she is solvent.[26]
[26] Ibid at [43]-[44].
Again, in Culleton, the Full Court emphasised the fundamental change in status wrought upon a person who was rendered bankrupt and the fact that such a change in status was very often replete with connotations of moral failure. As such, it remined first instance courts, such as this one, not to forget the human reality of bankruptcy and the potential emotional significance it held for the individuals affected by it.
As such, bankruptcy is a species of litigation with idiosyncratic characteristics, which set it apart from other types of adversarial litigation, as its outcome can fundamentally change the status of the property and individuals affected by it. In this context, the Full Court reaffirmed that it is not merely a mechanism for debt collection. The Full Court said as follows:
Bankruptcy is not just a variety of inter partes litigation; it does not deal only with the private rights and obligations of the debtor and creditor; it is not a form of judgment execution. It is directed to the estate of a person who is insolvent. In that sense it has a public interest, through the general body of creditors and potential creditors of the debtor and prospective bankrupt, and through what is referred to as the change of status of the person who becomes a bankrupt. That status is changed because of the provisions of the Act which inhibit conduct and affect rights and obligations of the bankrupt, including making the bankrupt susceptible to criminal punishment for what would otherwise be innocent conduct.[27]
[27] Ibid at [40].
The applicable principles were concisely summarised by Hely J in ANZ Banking Group v Foyster[28] as follows:
The onus of proving sufficiency of assets lies on the respondent. It is not sufficient for the respondent simply to establish that he has assets which exceed his liabilities in value. It must also be established that the assets are available to be realised and that they are capable of ready realisation. If a debtor is able to pay his or her debts, but is recalcitrant, the creditors may resort to other remedies, such as execution against property and garnishee proceedings, but not to sequestration. Bankruptcy is not a proceeding designed for the recovery of debts:
[28] ANZ Banking Group v Foyster [2000] FCA 400 at [17].
In the current matter, if Ms Steicke’s estate is sequestered, it will have the effect of her estate, which she has valued at in excess of $12m, vesting in a trustee appointed by the court, with all the concomitant stress and dislocation this will entail for her, to recover debts which Mr Gretsas has calculated, at their maximum extent to be slightly less than $3m. Most significantly, she has established she has $5m in liquid assets available to her in a bank account at call.
In his submissions, Mr Thomas accepts that the expression able to pay his debts in section 52(2) does not mean willing and able to do so. Thus, a person who demonstrates he or she is able to pay their debts, but refuses to do so, is to be regarded as solvent.
However, the further effect of his submission is that the court must look to the reality of a debtor being able to recover monies owed to it being able to recover the debt by other means such as execution or garnishment. If it is apparent that such interventions are liable to prove to be sterile it may be necessary for the court to exercise the discretion invested in it to make an order for sequestration.
Essentially, Mr Thomas submits that this is an issue which is not appropriately determined on a summary basis but is one which requires the court to make findings, arising from an assessment of the credit of Ms Steicke, which will be obtained through his cross-examination of her, before it can determine whether execution is likely to be rendered sterile for whatever reason.
In this context, he relies on what was said by the Full Court in Trojan v Corporation of Hindmarsh[29] as follows:
…the principle laid down in the Sarina case would not necessarily be satisfied by a sterile demonstration of an ability to achieve a payment which was not in reality at all likely to be compelled. Section 52(2)(a) envisages a situation which will probably bear fruit in payment. It is not easy to see any other reason why the legislature saw fit to make a demonstration of ability to pay only a discretionary ground of dismissal of a petition, and not an absolute bar to its success.
[29] Trojan v Corporation of Hindmarsh (1987) 16 FCR 37 at 48.
In response, Mr Gretsas points to the fact that his client, in discharging the onus placed upon her, has deposed as to her control of $5m in a bank account, standing in her name, in respect of which she has provided a clear provenance, which is not open to dispute, namely she received $2m from Mr Steicke and further sold her property at Summerton Park.
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.
In this context, in my view, it seems a reasonable inference that Ms Steicke’s evidence that she continues to receive regular and significant cash transfers, from her former husband, via Ward Street Nominees Pty Ltd, is true.
As such, this is not a case where a debtor has presented a balance sheet which is replete with ambiguities or stuffed with assets which rely on an uncertain process of realisation. In my view, the evidence available to me clearly indicates that Ms Steicke is, as Mr Gretsas characterises her, an extremely wealthy woman.
I also acknowledge that, from the perspective of the applicant, Ms Steicke is also a difficult and querulous person. However, that is not the point. It is not my function to determine whether the various stances she has taken in the multiplicity of litigation in which she has been involved over the past two decades has been reasonable or otherwise or indeed, given the manner in which the current litigation has proceeded, the merits or otherwise of her foreshadowed litigation against various of her former legal advisors.
What I am required to do is to consider the exercise of a discretion within the context of the idiosyncratic confines of the bankruptcy legislation. As was pointed out in Culleton, bankruptcy is not another form of civil litigation directed towards the collection of debts per se.
This is because an order for sequestration results in an essential change to the legal status of the person concerned and has the effect of vesting all his or her property in the relevant trustee, which go far beyond the collection of monies owing. It also has implications for other legal rights, which the bankrupt person previously had and which he or she may have wished to pursue in future. These too may vest in the trustee.
In general terms, the effect of sequestration is of a stripping of rights from the person rendered bankrupt and the administration of all his or her affairs for both identified and contingent creditors.
For this reason, the discretion is not to be exercised in respect of a person who has the capacity to pay his/her identified debts but chooses not to do so. It is not appropriate to utilise such a power, when other avenues of civil litigation are available to recover debt, which fall short of bankruptcy.
As Hely J observed in Foyster, bankruptcy is not a proceeding designed for the recovery of debts. In my view, the authorities are clear that in dealing with a recalcitrant or obstructive debtor, who has the means to pay his or her debts, the relevant creditors must resort to other remedies available in civil litigation to recover its debts, such as execution against property and garnishee proceedings.
In this case, the evidence indicates that Ms Steicke has ample real property and other assets, which make such remedies potent rather than sterile ones. In this context, Part 2 of the Enforcement of Judgments Act 1991 (SA) provides creditors with a variety of options to recover monies due under a judgment debt obtained in this state.
In her evidence, Ms Steicke has identified this property, which has been subject to her control since 2017. There is no evidence to indicate that she will attempt to convert this property or conceal it. Thus, it remains subject to potential claims, which fall short of her status, as a legal person, being changed through bankruptcy.
For these reasons, I have come to the conclusion that there is sufficient evidence for me to conclude that, given the applicable authorities, when combined with Ms Steicke’s level of asset backing, she is not insolvent and therefore the applicant has no reasonable prospect of successfully prosecuting the petition filed in the matter and it should be dismissed.
Given this finding, it is not necessary for me to determine whether the filing of the petition can be characterised as an abuse of process nor whether she has a viable counterclaim, set off or cross demand against the petitioner.
The final issue for determination is whether an order for indemnity costs should be made in Ms Steicke’s favour, as sought by Mr Gretsas. Pursuant to section 32 of the Bankruptcy Act the court may in any proceedings before it … make such orders as to costs as it thinks fit.
The primary basis for Mr Gretsas’ position is that his client’s position in the matter has been totally vindicated and this is a case in which given its extensive knowledge of the intricacies and idiosyncrasies of Ms Steicke’s financial circumstances, the unsuccessful petitioner must be taken to be well aware that she was an extremely wealthy person but chose to proceed with sequestration anyway.
The general rule in civil litigation is that a wholly successful party ought to receive his or her costs. In a number of cases, including Oshlack v Richmond River Council[31] superior courts have cautioned in respect of courts easily departing from this general rule.
[31] Oshlack v Richmond River Council (1998) 193 CLR 72.
As to the fixing of costs, Division 13.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 applies. Under rule 13.01(1) a person who is entitled to costs in accordance with Part 40 of the Federal Court Rules 2011 unless the court otherwise orders. Pursuant to rule 13.02(2) the court may fix the amount of costs.
Part 40 of the Federal Court Rules provides mechanisms for the taxation of costs and for the award of a short form bill of costs. There is also provision for costs in a lump sum, which necessarily avoid the expense, delay and protraction of litigation arising out of taxation.[32]
[32] See Commonwealth v Harrison (No 2) (2020) 381 ALR 328.
Indemnity costs are exceptional in their nature. In Colgate Palmolive v Cussons Pty Ltd[33] it was held that indemnity costs are not commonly ordered and will only be ordered if the court is satisfied that there is some special or unusual feature of the case to justify the Court in departing from the ordinary practice of ordering the costs be paid on a party and party basis.
[33] See Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 at 233.
There is no closed category of cases in which indemnity costs might appropriately be ordered, but in Colgate Palmolive, the court said that the kinds of situation in which indemnity costs might be considered were where a litigant had:
·commenced or continued an action knowing it to have no chance of success;
·made false or irrelevant allegations of fraud;
·made groundless allegations which prolong a case; and
·imprudently refused an offer to compromise.
In more general terms, an order for indemnity costs may be made if the justice of the case might so require.[34] Other circumstances which may justify such an award include:
·conduct which causes loss of time to the court and other parties;
·commencement of proceedings for an ulterior motive; and
·the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.[35]
[34] See Australian & International Pilots Association v Qantas Airlines Limited (No 3) [2007] FCA 879 at [39].
[35] See Ryan v Primesafe [2015] FCA 8 at [110].
Given the circumstances of this matter, I do not think an award for indemnity costs would be appropriate. It cannot be said that the position of Pedericks was without merit. At the end of the day, they do hold two significant judgment debts against Ms Steicke, of which she is well aware. She cannot be described as a neophyte when it comes to litigation.
From Pedericks’ perspective, she has been obdurate in her attitude towards it and the payment of the costs awarded in its favour, in the taxation and related proceedings. As such, it can hardly come as a surprise to her that the applicant would pursue her, as vigorously as possible, with all the mechanisms available to it.
On the other hand, Ms Steicke, from the time she filed her opposition to the petition, has indicated that she is solvent. In my view, this is not a case in which this opposition can be described as outlandish or a delaying tactic. Rather it should have given pause for thought as to the appropriateness of sequestration.
In all these circumstances, I decline to make any orders as to costs. For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and fifty-one (151) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 28 February 2025
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