Pepper Finance Corporation Ltd v DEAN

[2015] FCCA 3398

FEDERAL CIRCUIT COURT OF AUSTRALIA

PEPPER FINANCE CORPORATION LTD v DEAN [2015] FCCA 3398

Catchwords:
BANKRUPTCY – Application to set aside sequestration order – whether the Court should exercise its discretion to go behind a consent judgment – whether the judgment debtor signed the consent orders under duress – whether appropriate steps were taken to challenge the consent order earlier – the application for review is dismissed.

Legislation:

Bankruptcy Act 1966, ss.27, 52(1), 52(2)(b)

Ramsay Health Care Australia Pty Limited v Compton [2015] FCA 1207
Katter v Melhem [2014] FCA 1176

Applicant: PEPPER FINANCE CORPORATION LTD AS TRUSTEE OF THE COLLECTION SERVICE TRUST

Respondent: NOOR DEAN

File Number: SYG 1045 of 2015

Judgment of: Judge Street

Hearing date: 17 December 2015

Date of Last Submission: 17 December 2015

Delivered at: Sydney

Delivered on: 17 December 2015

REPRESENTATION

Counsel for the Applicant: Mr J Selimi

Solicitors for the Applicant: Gadens Lawyers

Solicitors for the Respondent: Ms M Skinner
MLC Lawyers

ORDERS

1. Order 1 made by the Registrar on 27 August 2015 is affirmed.

2. The application for review is dismissed.

3. The Respondent pay the applicant’s further costs fixed in the amount of $8500 and I direct that these costs are to be given the same priority under s.109(1)(a) of the Bankruptcy Act 1966 (Cth) as the fixed costs orders by the Registrar on 27 August 2015.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1045 of 2015

PEPPER FINANCE CORPORATION LTD AS TRUSTEE OF THE COLLECTION SERVICE TRUST

Applicant

And

NOOR DEAN

Respondent

REASONS FOR JUDGMENT

1. This is an application to set aside a sequestration order made by a Registrar on 22 August 2015 within the Court’s jurisdiction under s.27 of the Bankruptcy Act 1966 (Cth). The nature of the hearing is a hearing de novo on the application.

2. The matter came before the Court on 10 December 2015 at which time the Court drew attention to counsel for the judgment debtor of the potential deficiencies with the affidavit evidence of the judgment debtor.  The Court made orders that provided an opportunity for the judgment debtor to file further evidence on or before 10 December and no such affidavit evidence was filed.

3. An affidavit of the judgment debtor has been read that purports to identify circumstances in which it is said the Court should go behind a consent judgment signed by the judgment debtor on 15 December 2014 in proceedings in the Local Court of New South Wales.  That consent judgment was signed by the judgment debtor after there had been filed in the proceedings in the Local Court a purported defence dated 6 June 2014. 

4. The substance of the affidavit was to the effect that the judgment debtor had been defaulted by a third party in acquiring a vehicle which the judgment debtor contends was not the subject of any use by him and which the judgment debtor contends was not the subject of any document signed by him. 

5. The affidavit of the judgment debtor does not identify what occurred in the conduct of the Local Court proceedings and has a heading, “Reasons for Signing Consent Orders”, in which generalised allegations are made against a third party and nothing is said as to some operative duress referable to the signing of those consent orders.  There is no fact identified that supports any ground to reopen the consent orders signed by the debtor on 15 December 2014.

6. The principles in relation to going behind a judgment have been more recently summarised by Flick J in Ramsay Health Care Australia Pty Limited v Compton [2015] FCA 1207 at 13 to 17 and also in the helpful summary of the principles by Wigney J in Katter v Melhem [2014] FCA 1176 at 69 to 81. Those principles identify of the first question is whether the discretion should be exercised to go behind the judgment.

7. In the present case, the circumstances surrounding the making of the consent order were not addressed by the judgment debtor, nor did the judgment debtor disclose the fact that he had filed a defence or identify circumstances as a result of which it could be said there was a ground to challenge the compromise reflected in the consent orders in the proceedings.  In these circumstances, I am not satisfied that the discretion to reopen the judgment should be exercised. 

8. I also take into account that if there was operative duress, it was a matter that the judgment debtor could have and should have sought to agitate at a time much earlier than the hearing of the creditor’s petition that occurred before the Registrar.  It is not apparent that any step was taken to challenge or seek to set aside the bankruptcy notice which was served on 2 February 2015 on the judgment debtor.  There was no explanation as to why proceedings on these issues were not taken in the Local Court to challenge the consent order if, in fact, it was the subject of an allegation of duress. 

9. The judgment creditor has read affidavits in support of service of the bankruptcy notice, the verification of the petition, the service of that petition, the creation of the underlying debt, the obtaining of the judgment by consent in the Local Court and a current affidavit of debt.  I find the act of bankruptcy occurred on the 23^rd of February 2015. I find that the petitioning creditor has proved the criteria identified in s.52(1) of the Bankruptcy Act 1966. 

10. Counsel for the judgment debtor advanced a submission that if the Court was not satisfied that it should go behind the judgment debt, nonetheless, this was a case where, because of the assertions advanced by the debtor, other sufficient cause had been made out under s.52(2)(b) and that the petition should be dismissed.

11. On the material before the Court, I am satisfied that the applicant is not able to pay its debts. I am not satisfied that there is other sufficient cause whereby a sequestration order ought not to be made.  For the reasons earlier expressed, the affidavit of the judgment debtor falls a long way short of identifying grounds upon which the compromise reflected in the consent orders could properly be challenged.  I further take into account in that regard the failure of the judgment debtor to take any steps, on the evidence before the Court, to move the Local Court to set aside the consent order.  I also take into account the failure by the judgment debtor to take any steps to challenge the bankruptcy notice. 

12. I am satisfied that the judgment debtor committed an act of bankruptcy on 23 February 2015 and that the criteria under s.52(1) are satisfied. The Court is not satisfied that any ground has been made out to dismiss the petition under s.52(2) of the Bankruptcy Act 1966.  The application for review of the Registrar’s decision on 22 August 2015 is dismissed and the sequestration order of the Registrar is affirmed.   

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Judge Street

Associate: 

Date: 18 December 2015