Quinn and Scattini v Menso - [2007] FMCA 1956

FEDERAL MAGISTRATES COURT OF AUSTRALIA

QUINN & SCATTINI v MENSO

[2007] FMCA 1956

BANKRUPTCY – Application for sequestration order – whether “other sufficient cause” shown that sequestration order ought not be made – tender of debt and costs.

Bankruptcy Act1966; ss.52

Re Hecquard; ex parte Hecquard (1889) 24 QBD 71

Applicant:

QUINN & SCATTINI (A FIRM)

Respondent:

MARIO MENSO

File number:

BRG 802 of 2007

Judgment of:

Wilson FM

Hearing date:

16 November 2007

Date of last submission:

16 November 2007

Delivered at:

Brisbane

Delivered on:

23 November 2007

REPRESENTATION

Counsel for the Applicant:

N/A

Solicitors for the Applicant:

Quinn & Scattini

The Respondent in person:

Mr Menso

Solicitors for the Respondent:

N/A

ORDERS

The creditor’s petition be dismissed.
The respondent pay the applicant’s costs fixed in the sum of $900.00.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 802 of 2007

QUINN & SCATTINI (A FIRM)

Applicant

And

MARIO MENSO

Respondent

REASONS FOR JUDGMENT

The applicant seeks a sequestration order against the estate of the respondent. The applicant firm was the former solicitors for the respondent. It obtained a judgment for $5,931.16 against the respondent in the Magistrates Court at Brisbane on 1 June 2007. That judgment remains unsatisfied, and continues to accrue interest.
The judgment obtained by the applicant creditor was after a contested application for summary judgment. Magistrate Roney gave judgment for part of the applicant’s claim and apparently ordered that there be leave to defend in respect of the balance of the claim, in the sense that her Honour ordered that it “proceed before the Court.” There is no evidence before this court that in the Magistrates Court proceedings the respondent has asserted any set off or cross claim that might extinguish the applicant’s claim.
A bankruptcy notice was served on the respondent on 14 August 2007. No application was made to set the notice aside or to extend the time for compliance with it. An act of bankruptcy was therefore committed on 4 September 2007.
The creditor’s petition was filed on 19 September 2007. On 10 October 2007 the respondent filed a notice stating grounds of opposition to the petition. Whilst acknowledging that the respondent appears for himself, the notice is largely incomprehensible, but as I read it, makes no attack on the validity of the bankruptcy notice, nor disputes service of it. The notice, and the respondent’s three affidavits filed in support of it, seem to agitate the following points:
a)The respondent has for many years (he estimates seven years) been embroiled in disputation with the ANZ Bank;
b)Several firms of solicitors have acted on the respondent’s behalf, and each has failed to resolve the dispute with the bank to the respondent’s satisfaction;
c)The applicant firm acted as solicitors for the respondent not only in the primary dispute he had with the ANZ bank, which was being litigated in the District Court of Queensland, but also in proceedings in this court;
d)In this court the bank sought to bankrupt the respondent as a consequence of interlocutory costs orders it had obtained against him. On 18 October 2006 I decided that a bankruptcy notice issued against the respondent by the bank was invalid. As a consequence, costs orders were made in favour of both parties relating to various aspects of the proceedings before me;
e)Subsequently, at a mediation held in March 2007 the ANZ Bank and the respondent compromised their litigation on terms that included the forgiveness by both parties of the costs order they had in their favour as a result of the proceedings before me;
f)The respondent complains that it took too long to resolve the proceedings brought against him by the bank, and he had been requesting that the bank provide better disclosure and attend mediation for some time;
g)The respondent complains that the applicant solicitors acted inappropriately in failing to expeditiously resolve the proceedings involving the bank, and this caused him not only anxiety but also the unnecessary expenditure of legal fees;
h)The respondent claims that he paid the applicant solicitors $12,000 in the bankruptcy proceeding, and given the terms of the compromise, that sum ought be returned to him;
i)The respondent claims that because the applicant solicitors ceased acting for him in mid 2006 (due to the respondent not placing them in funds) when they recommenced acting for him, a new client agreement was required before the solicitors could recover their fees (in reliance on s.48J Queensland Law Society Act 1952).
The Magistrates Court proceedings that culminated in the judgment upon which the bankruptcy notice and creditor’s petition are based were not put into evidence. I do not have the pleadings or the reasons for judgment of Magistrate Roney.
In his second affidavit filed 10 October 2007 the respondent has exhibited the affidavit that he filed in the Magistrates Court, presumably on the summary judgment application. That affidavit raises the same matters as the respondent seeks to argue before me.
The respondent seeks to persuade me to go behind the judgment that the applicant has obtained. However, the arguments that he advances for doing so were put before the Magistrate, and dealt with by her in giving judgment as she did. There is nothing in the respondent’s affidavit material that was not, or could not have been put before the Magistrate. I am not persuaded that there is any basis for going behind the judgment, obtained after argument, which the applicant has in its favour. There are no substantial reasons for believing that a debt is not owed by the respondent to the applicant.
In his first affidavit filed 10 October 2007 the respondent exhibits a letter from the applicant in which it is stated:
“The work for which we are suing (the bankruptcy matter) was successful in its entirety and avoided you being made bankrupt . . .”
It is evident from the contents of this letter that the amount claimed by the applicant exceeded the amount for which it obtained judgment. Also exhibited to the same affidavit are copies of the applicant’s trust account ledgers that show the receipt and application of monies on the respondent’s behalf. The respondent did not point to anything in those documents that evidenced inappropriate conduct on the part of the applicant.
It follows that the respondent has failed to persuade me that the judgment obtained by the respondent is susceptible to attack. The applicant has proved that the judgment remains unsatisfied. No material was put before the court as to the respondent’s solvency. I cannot dismiss the petition pursuant to s.52(2)(a) Bankruptcy Act1966.
I have a discretion, pursuant to s.52(2)(b) of the Act, to dismiss the petition upon the respondent demonstrating other sufficient cause. There is ample authority to the effect that bankruptcy ought not be used to compel a recalcitrant debtor to pay his debts. Here, the respondent is plainly disillusioned by what he perceives to be the shortcomings of his legal representation. It appeared to me from oral submissions that the respondent may also have been labouring under the misapprehension that the applicant still had funds in its trust account, or that he should be entitled to reclaim monies previously paid by him to the ANZ Bank.
The amount claimed is modest. There is no evidence that the respondent has other creditors that may seek to rely on the act of bankruptcy committed by him. The respondent stated, from the bar table, that if he was required to pay the amount claimed by the applicant he could do so. However, the fact that, after the commission of an act of bankruptcy and the presentation of a petition, the debtor tenders the whole of the debt is not of itself “sufficient cause” within s.52(2)(b) and the creditor is entitled to refuse such tender. Further, it is not enough to constitute other sufficient cause for dismissing the petition that there is only one creditor, though it is a matter to be taken into account in the exercise of the court’s discretion: Re Hecquard; ex parte Hecquard (1889) 24 QBD 71 at 75-6.
In my view, if the respondent pays the full amount of the petitioning creditor’s debt and its costs, a sequestration order ought not be made. The factors that lead me to that conclusion are, first, that the debt of the applicant is the only known debt of the respondent, and it is for a very modest amount; secondly, if the respondent were made bankrupt, the costs of administration would far exceed the debt owed by the respondent and it would be unfair and oppressive to require the respondent to meet those costs if he pays the petitioning creditor in full; thirdly, that the bankruptcy of the respondent would make his defence of the continuing proceedings brought against him by the applicant problematic; fourthly, the respondent’s opposition to the bankruptcy notice was indicative of an unwillingness to pay rather than an inability to pay the debt; and, fifthly, that the pursuit of bankruptcy proceedings by the applicant was not the only available means of recovering its debt.
On the hearing, the solicitor for the applicant stated that $900.00 would cover its costs of the bankruptcy proceedings. I propose therefore to order that, provided the respondent tenders to the applicant a bank cheque for $6,894.98 forthwith, the creditor’s petition shall stand dismissed.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Wilson FM

Associate: Lynnette Chin

Date: 23 November 2007