Plaster Plus (Australia) Pty Ltd v ZHOU - [2013] FCCA 1983

FEDERAL CIRCUIT COURT OF AUSTRALIA

PLASTER PLUS (AUSTRALIA) PTY LTD v ZHOU & ANOR

[2013] FCCA 1983

Catchwords:
BANKRUPTCY – Urgent ex parte application under s.50 of the Bankruptcy Act – application for freezing orders – respondent overseas – injunction ordered.

Legislation:

Evidence Act 1995 (Cth), s.75

Bankruptcy Act 1966 (Cth), ss.30, 30(1)(b), 50

Smith v Varley [2006] FMCA 1572
Deputy Commissioner of Taxation v Clyne [1983] FCA 189
Talacko v Talacko [2010] FCA 193
Australian Broadcasting Corp v O’Neill (2006) 227 CLR 57

Applicant:

PLASTER PLUS (AUSTRALIA) PTY LTD A.C.N. 050 143 621

First Respondent:

JACKIE ZHOU

Second Respondent:

JOYCE PAN (ALSO KNOWN AS YING PAN)

File Number:

MLG 1652 of 2013

Judgment of:

Judge Burchardt

Hearing date:

7 November 2013

Date of Last Submission:

7 November 2013

Delivered at:

Melbourne

Delivered on:

7 November 2013

REPRESENTATION

Counsel for the Applicant:

Ms Rieschieck

Solicitors for the Applicant:

Russell Kennedy Solicitors

Counsel for the Supporting Creditor:

Mr King

Solicitors for the Supporting Creditor:

J King Legal

The Respondent:

No appearance

ORDERS

UPON THE APPLICANT GIVING THE USUAL UNDERTAKING AS TO DAMAGES, THE COURT ORDERS THAT:

Pursuant to s.30(1)(b) of the Bankruptcy Act 1966 (Cth), the Second Respondent, Joyce Pan (also known as Ying Pan), be restrained from taking any further steps by herself or by her employees, agents or attorneys for the purpose of selling, transferring, donating or otherwise dealing with the property situated at 7 Vivien Street, Blackburn North, Victoria 3130, without leave of the Court.
The parties have liberty to apply on short notice to His Honour Judge Burchardt, or in his absence, to His Honour Judge Riethmuller.
The costs of today be reserved.
The Applicant serve a sealed copy of these Orders on the Second Respondent by:
(a)serving same at Sam Loans, Level 4, Suite 1, 37-41 Prospect Street, Box Hill, Victoria; or
(b)personal service if practicable.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT MELBOURNE

MLG 1652 of 2013

PLASTER PLUS (AUSTRALIA) PTY LTD A.C.N. 050 143 621

Applicant

And

JACKIE ZHOU

First Respondent

JOYCE PAN (ALSO KNOWN AS YING PAN)

Second Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

In this matter, the Court’s ruling will be transcribed and forwarded to the parties as soon as practicable. The substantive proceeding is a creditor’s petition filed on 4 October 2013. From the affidavit material filed, it is clear that on 14 August 2013, the applicant creditor obtained a final order against the second respondent for a relatively substantial amount of money, in excess of $65,000, in the Magistrates Court of Victoria. That was followed by a bankruptcy notice which was served, as the material made clear, upon Ms Pan and to which she did not respond.
Thereafter, again, the petition was filed. It is due to be heard on 19 November 2013 before a Registrar. The affidavit material filed, which I necessarily paraphrase somewhat generally, shows that at some point, not necessarily identified precisely, the creditor became aware that the second respondent was selling a property in Blackburn North. The research showed that the property was sold for $745,000. Putting the matter more generally, as I concede is the case, the applicant is now aware that the property appears to have been sold and taken off the market.
Although the evidence is hearsay and only admissible pursuant to s.75 of the Evidence Act 1995 (Cth) on this interlocutory hearing, there is an understandable apprehension upon the creditor’s part that the sale could be brought to a very rapid conclusion and there is a concern that the second respondent – well, the respondent to the interlocutory application, Ms Pan - might in some way abstract the funds concerned. This concern arises out of the fact that the sale of the property appears to have been, if not initiated certainly propelled, after the act of bankruptcy by the non-compliance with the bankruptcy notice and by the fact that the respondent appears to be overseas and uncontactable.
It is further added to by the fact that the respondent has not, in any way, responded to the applicant’s endeavours to shed light upon the issue by their own inquiries. The interim application is brought pursuant to s.50 of the Bankruptcy Act 1966 (Cth). It seeks, in effect, orders restraining the respondent from further dealing with the property, the process of sale and also seeks the appointment of a trustee. There is a trustee’s consent to act on the Court file. Section 50 of the Bankruptcy Act 1966 (Cth) reads as follows; relevantly:
“At any time after a bankruptcy notice is issued, or a creditor’s petition is presented, in relation to a debtor, but before the debtor becomes a bankrupt, the Court may:
a)direct the Official Trustee or a specified registered trustee to take control of the debtor’s property; and
b) make any other orders in relation to the property.”
I have discussed the terms of that section with counsel and I think we are of one mind, that those two powers are cumulative. Thus, it is not possible for the Court to make any other orders in relation to the property unless a trustee is appointed. I have made it clear that I have had regard to the authorities quoted to me. As Raphael J said in Smith v Varley [2006] FMCA 1572, at which time his Honour was still a Federal Magistrate, at [2]:
“The authorities make it fairly clear that this is not a section to be called in aid lightly and that the court must have before it some reasonable information concerning the activities of the debtor and the concern which the creditor has that those assets might be dissipated so that the interests of all creditors could be harmed:”
And his Honour quoted authority. His Honour also said at [4]:
“If there was some suggestion that the property might be sold very speedily, and the proceeds of sale squirreled away from the debtor’s creditors, I would be sympathetic to (the application)…”
His Honour felt there was no such evidence. If one looks at the other authorities to which I have been referred, such as Deputy Commissioner of Taxation v Clyne [1983] FCA 189 and Talacko v Talacko [2010] FCA 193, those involve spectacularly different sets of factual circumstances to those here. The reality is that I do not have evidence as to the circumstances of the debtor in a general sense, nor do I have any idea as to what other creditors she may have, nor can I be necessarily satisfied that an order that I might make to appoint a trustee would benefit all the creditors because it is very possible that there is a secured creditor over the property that is to be sold.
The state of the evidence as to the process of the sale is that the property has been taken off the market and there is hearsay admissible evidence that a contract has been entered into but not yet executed by the respondent. The best evidence is that she will execute it when she returns to Australia:
“…in two weeks.”
(See affidavit of Philip Garvey paragraph 4).
In my view, it is appropriate, bearing in mind that I think it is inappropriate to appoint a trustee with all the attendant expense over the entirety of the respondent’s estate, to exercise the general powers of the Court in bankruptcy, pursuant to s.30. Those powers include, under s.30(1)(b), making injunctions. This is a case in which there is very clearly a serious question to be tried – to use the old language – but not forgetting the way it has been formulated by the High Court in Australian Broadcasting Corp v O’Neill (2006) 227 CLR 57. But there is a serious question to be tried as to whether or not the respondent should be restrained from dealing with the proceeds of sale of this property pending the hearing of the sequestration order.
The balance of convenience lies wholly and overwhelmingly in the applicant’s favour. I am not going to prevent the contract from being completed, in the sense that while I am making orders, effectively freezing the applicant’s conduct of the sale and freezing her dealing with the proceeds of it if there are any, there is liberty to apply on short notice, which the respondent can rapidly access should she be so advised. And plainly, if there is anything that needs to be done to enable any third party interest, for example, to be accommodated, then that is going to be readily practicable.
I bear in mind the best state of the evidence is that the respondent is overseas. Service upon her may be problematic in any event, pending her return. It seems most improbable to me that there will be any loss occasioned to the respondent by the orders that I make and even if there were to be some such suggestion, as I say, it would be readily available to her to return to Court to agitate the matter, should she so desire. In these circumstances, the interests of justice are plainly properly served by making the kind of modified order I have discussed with counsel and I will do so and I note that counsel has given the usual undertaking.

I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Associate:

Date: 26 November 2013