Richard Calley Pty v Burnell-Slorach
[2005] FMCA 1577
•28 October 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RICHARD CALLEY PTY v BURNELL-SLORACH | [2005] FMCA 1577 |
| BANKRUPTCY – Application for a Sequestration Order – where the respondent is unrepresented and suffers from certain disabilities – where the judgment debt arose from services provided by the applicant creditor as solicitor for the respondent debtor in relation to Family Court proceedings – where the respondent debtor seeks to dismiss the creditor’s petition on the basis of her pending Family Court appeal – whether pending proceedings in the Family Court are relevant to the creditor’s petition – where pending proceedings in other courts are considered “merely speculative”. |
| Family Law Act 1975 (Cth), ss.121, 121(9)(a) Bankruptcy Act 1966 (Cth), s.52 |
| Williams and Others v Spautz (1992) 174 CLR 509 Dowling v Colonial Mutual Assurance Society (1915) 20 CLR 509 |
| Applicant: | RICHARD CALLEY PTY T/A RICHARD CALLEY BARRISTERS & SOLICITORS |
| Respondent: | LOUISE JANE BURNELL-SLORACH |
| File Number: | MLG 528 of 2005 |
| Judgment of: | McInnis FM |
| Hearing date: | 16 August 2005 |
| Delivered at: | Melbourne |
| Delivered on: | 28 October 2005 |
REPRESENTATION
| Solicitor for the Applicant: | Mr J. Dunne |
| Solicitors for the Applicant: | John Dunne & Associates |
| Respondent: | In Person |
ORDERS
A sequestration order be made against the estate of Louise Jane Burnell-Slorach.
The applicant creditor’s costs be taxed in accordance with the Federal Court Rules, and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
The Court notes that the date of the act of bankruptcy is 1 March 2005.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1147 of 2005
| RICHARD CALLEY PTY T/A RICHARD CALLEY BARRISTERS & SOLICITORS |
Applicant
And
| LOUSIE JANE BURNELL-SLORACH |
Respondent
REASONS FOR JUDGMENT
Richard Calley Proprietary trading as Richard Calley Barristers & Solicitors (“the applicant creditor”) by a creditors petition filed 10 May 2005 seeks a sequestration order against the estate of Louise Jane Burnell-Slorach (“the respondent debtor”). The petition relies upon a bankruptcy notice wherein the sum of $34,647.08 is claimed to be owing by the respondent debtor to the applicant creditor. That sum was the subject of a judgment obtained by default in the State Magistrates Court at Melbourne on 3 May 2004.
At the time of filing the creditor’s petition on 10 May 2005 the applicant creditor also filed the usual affidavits verifying that the statements in the petition were correct. I note in passing that the petition refers to an amount owing of $24,647.08 whereas the bankruptcy notice refers to the amount owing of $34,647.08. Nevertheless, the affidavit material and the petition itself refers to the lower figure which I take to be relied upon.
Considerable difficulty occurred in this application as a direct consequence of the respondent debtor being unrepresented and suffering certain disabilities. In particular she suffers from a profound hearing disability and arrangements had to be made to provide appropriate court facilities to enable her to hear the proceedings. Initially the respondent debtor relied upon a notice of intention to oppose the petition filed 20 June 2005 and an affidavit filed the same date.
The judgment debt arose from legal services provided by the applicant creditor to the judgment debtor in relation to Family Court proceedings between the respondent debtor and her former husband which have had a somewhat chequered history in the Family Court of Australia.
In her notice of intention to oppose the petition the applicant sets out the following grounds;-
1. That there has been a denial of Natural Justice Procedural Fairness
2. That a Notice of Appeal has been filed on the 10 June 2005 to appeal orders made on 29 October 2004 and seek damages
3. Miscarriage of Justice
4. Improper or unreasonable conduct or misconduct of lawyers causing delay and hardship.
It will be readily apparent from the grounds relied upon in the notice that no reference is made to any appeal being lodged in relation to the judgment relied upon to support the debt claimed in this instance by the applicant creditor. Instead, the Notice of Appeal refers to orders made on 29 October 2004 which in fact were orders made by Justice Faulks of the Family Court of Australia following a hearing about the division of property between the respondent debtor and her then husband. There is no doubt that an appeal from Justice Faulks decision was filed on
10 June 2005 and apparently the time for filing the appeal was extended by an order made by the Family Court on 31 May 2005. The relevance of the Family Court proceedings will be dealt with presently, though at this stage reference is made to it simply to explain the grounds initially relied upon the respondent debtor.
When the matter came before a registrar on 21 June 2005 orders were made for the matter be adjourned to 18 July 2005 and the respondent debtor was ordered to file and serve further affidavits setting out her assets, liabilities and a statement of affairs, including details “of assets affected by any court order”. It seems evident that at an early stage the court was concerned with the issue of solvency even though that issue did not appear to be raised directly in the notice of intention to oppose,the petition or the affidavit filed 20 June 2005. It should be noted that on 21 June 2005 an affidavit of debt was filed on behalf of the petitioning creditor confirming that the “amount of $24, 647.08” was still owing. An affidavit of search was also filed in court on the same day along with an affidavit of service of the petition. To understand the amount owing it is perhaps useful to also note that in the petition paragraph 2 provides as follows;-
2. The Applicant creditor does not hold security over the property of the respondent debtor save for the following securities (a) the Family Law file previously conducted by the Applicant which is valued by the Applicant Nil and which the Applicant is prepared to hand over to any Trustee appointed (b) An equitable charge dated 20th February, 2003 and Caveat lodged over the real property of the Respondent being Volume 8307 Folio 197 at 5 Karina Street South Frankston the value of which the security applicant creditor is not bale to properly valued consequent upon not knowing what equity the respondent debtor ha sin the property as a result of Family Law proceedings between the respondent debtor and her former husband and further from not knowing what amount is secured by mortgages ranking in priority to the applicant creditor’s Caveat but in any event the applicant creditor does not believe the value of the security exceeds $10,000.00
The court notes from the file that the respondent debtor by letter dated 20 June 2005 addressed to the registrar refers to the Family Court proceedings and asks the court to dismiss the creditors petition to allow the respondent debtor to proceed with her Family Court appeal. It is not necessary to refer further to that affidavit material or the covering letter, save that at least at that point one could presume that the applicant seeks to dismiss the creditor’s petition on the basis of her pending appeal to the Family Court.
The respondent debtor filed a further affidavit on 15 July 2005 sworn the same day which appears to attach the notice of intention to oppose the petition and the earlier correspondence dated 20 June 2005, together with a new notice of address for service, a copy of the previous affidavit sworn 20 June 2005 and annexures including materials confirming the respondent debtor’s medical conditions. The affidavit in my view is not relevant.
A further affidavit also sworn by the respondent debtor on 15 July 2005 and apparently filed the same day attaches more medical evidence and an affidavit sworn 7 June 2004 which was purportedly sent by the respondent debtor to the State Magistrates Court at Melbourne. That affidavit acknowledges that the respondent debtor was served with the complaint in the State Magistrates Court. Otherwise, it sets out the details of the Family Court proceedings and her personal difficulties including details about her medical condition. A copy of the complaint is also attached to the affidavit of the respondent debtor sworn 15 July 2005 together with copies of correspondence from the respondent debtor to the applicant creditor’s solicitor dated 12 May 2004. An application for rehearing was also annexed and the handwritten application refers to it being filed on 15 June 2004. That application does not appear to have been pursued. The State Magistrates Court file obtained by this court does not record in the log entry a record of processing of the application for rehearing, though a covering letter dated 16 June 2004 appears to have a stamp dated 18 June 2004 indicating ‘received’ by the “Magistrates Court of Victoria”. Other family law documents and correspondence are attached to the affidavit of 15 July 2005 which again seem to refer to matters concerning the Family Court proceedings and/or the respondent debtor’s health.
On 15 July 2005 the respondent debtor also filed with the court a statement of affairs presumably to comply with the orders referred to earlier made by a registrar on 21 June 2005. The statement of affairs refers to the respondent debtor’s profession being “menswear retailer” and otherwise refers to income which substantially appears to comprise a pension and drawings from a home loan amounting to a total amount of $78,065. In relation to expected income in the next twelve months it refers simply to a pension of $10,600. The assets include a reference to a bank account with a current total balance of $172,520 in the SunCorp Bank and $5.06 in the National Bank. Real estate is referred to as comprising a three bedroom house at 5 Karina Street, Frankston South, claimed to have been acquired in 1986 for $150,000 with an estimated re-sale value of $435,000, with an amount of $172,520 owing. Reference is made to money owed to the respondent debtor from the Burnell Trading Trust Number 1 of $74,762; Handin Nominees Pty Ltd for the year ending 30 June 2003 an amount owing of $60,775, for the year ending 30 June 2004 an amount owing of $266,000 and for the year ending 31 June 2005 an amount of $165,465. Reference is made to vehicles and other assets which are otherwise unclear.
Under liabilities in the statement of affairs secured creditors are referred to as the Westpac Bank owed $98,000; SunCorp Bank owed $172,520 and Bank of Melbourne owed $17,000. There are numerous unsecured creditors including the applicant creditor where the total amount owing is “$33,000”. A total of unsecured creditors has not been calculated though it would appear to be $126,165.30.
The respondent debtor filed in court on 18 July 2005 a further affidavit purportedly sworn the same day. That affidavit appears to recite a great deal of the material already provided by the respondent debtor concerning her family court proceedings and in my view is irrelevant.
The matter came before the court on 18 July 2005 and on that date the applicant creditor filed an affidavit of debt, again confirming that the amount of $24,647.08 was still wholly due and unsatisfied and providing yet again a further affidavit of search. The court was unable to hear the matter on that day and adjourned it for mention on 28 July 2005. It did so on the basis that the respondent debtor who was unrepresented and clearly not in good health had failed to explain the chronology of events upon which she sought to rely, in part, supporting her claim in relation to solvency. I decided then to seek access to the Magistrates Court of Victoria file, the Family Court of Australia file and the Court of Appeal in the Family Court of Australia file, solely to determine with some degree of accuracy the nature and relevance, if any, of the proceedings in the Family Court and the extent to which there had been any attempt made by the applicant to challenge and set aside the judgment entered in the State Magistrates Court. Those files were ultimately obtained and viewed by the court and when the matter came before the court on 28 July 2005 I announced to the parties that I had obtained the files. My intention, as announced, was to consider the affidavit material of the respondent debtor and determine the grounds of appeal and when the appeal was likely to be heard, and to endeavour to identify a property pool and to then consider whether or not those pending proceedings in the Family Court may be relevant in any way to the issue of solvency in the creditor’s petition.
The court was concerned not to be in breach of s.121 of the Family Law Act 1975 (Cth) which provides a restriction on the publication of court proceedings, though I am satisfied for the present purposes that s.121(9)(a) of that Act should apply to permit the court to at least use the material obtained in connection with the current bankruptcy proceedings. In any event, it is not necessary to refer in detail to the pending proceedings in the Family Court, save and except that at those proceedings at first instance which are now the subject of an appeal, a number of assets were set out together with liabilities with a purported net difference whereby the assets total $617,000 and the liabilities total $159,746, leaving a total net difference of $457,254. The respondent debtor filed a further application on 27 July 2005 seeking to stay the creditor’s petition pending the outcome of an appeal in the Family Court and further seeking to file a cross application of damages and costs. Attached to that application was a draft cross-claim referring to Handin Nominees Pty Ltd (trustee) as applicant and the petitioning creditor as respondent.
The orders made by the Family Court on 29 October 2004 included an order that the property known as 5 Karina Street, Frankston South be transferred to the respondent debtor along with any interests of the husband in relation to the company Handin Nominees Pty Ltd. The wife was required to provide the appropriate indemnity, apart from the transfer of ownership in a motor vehicle and motorcycle to the husband. It was further ordered that the wife would pay to the husband $90,000 by way of property settlement. Further orders were made in relation to what would occur in the event that the wife failed to make that payment within 80 days and those orders included sale of the property at Karina Street, Frankston South and another option for the wife to sell a further property at 1 McMahon Road Frankston rather than Karina Street with an ability to apply for an extension of time within which to pay the $90,000. . It is not necessary to recite in further detail the orders made in the Family Court.
When that matter came before the court on 28 July 2005, apart from referring to the material that the court had referred to earlier, it was clear that the applications to which I have just referred had been filed. In any event on 28 July 2005 given the matter was only listed for mention and the creditor’s petition was adjourned for hearing on
16 August 2005 with each party being granted leave to file and serve any further affidavits to be relied upon by 12 August 2005. It should be noted at this time that pending Family Court proceedings were to be subject to further directions in that court on 15 August 2005 so that coincidentally, if the court resumed the petition hearing on 16 August 2005 then some updated material might be provided to the extent that it may be relevant.
The respondent debtor filed a further affidavit on 12 August 2005 sworn the same day which annexed her notice of intention to oppose the petition and she otherwise deposed to past dealings with the applicant creditor and the Family Court proceeding. She claimed not to have been served with the creditor’s petition on 10 June 2005, although deposed that she attended the court on 21 June 2005. In her affidavit she requests that the proceedings be stayed until the outcome of her Family Court appeal receipt of advice from counsel and a response from a complaint which she claims to have lodged with the Professional Standards Law Institute of Victoria. Other items were attached to the affidavit which were not in my view relevant. On
18 July 2005 it should be noted that the applicant had filed with the court a copy of her notice of appeal in the Family Court.
Through enquiries made by the court it appears that an appeal in the Family Court by the respondent debtor may be dealt with in the October 2005 sittings of that court or may be delayed until March 2006.
When the matter came before the court on 16 August 2005 the respondent debtor again appeared on her own behalf and in the light of her continuing request to either dismiss the petition or delay it pending the outcome of the Family Court appeal, there was some discussion about the status of that appeal and the court at least viewed what was described as the index to the appeal book.
Significantly the applicant creditor’s representative submitted, and I accept, that the affidavit material provided to the court by the respondent debtor effectively restated arguments and was directed more towards the question of a stay of the creditor’s petition pending the outcome of the Family Court appeal, rather than dealing with the issue of solvency. It was argued that the petitioning creditor is entitled to a sequestration order. Solvency, it was submitted, could not be found in circumstances where the respondent debtor had not discharged the onus and burden which he has to demonstrate to the court’s satisfaction that she is solvent. It was submitted and I accept that the material currently before the court does not demonstrate solvency. She has revealed some evidence of an excess of assets over liabilities but not sufficient to show that she can pay the debts as and when they fall due.
The applicant creditor was further prepared to make what appeared to be a reasonable compromise,by inferring, despite the lack of clarity in either the notice of opposition or the application and affidavit material, that perhaps the respondent debtor was seeking to rely upon s.52 of the Bankruptcy Act 1966 (Cth) (“the Act”) and demonstrate “other sufficient causes”. In dealing with that issue the court refers to the decision of Williams and Others v Spautz (1992) 174 CLR 509.
It was argued in the present case that there was no improper motive or indeed that there was no basis on which the court could conclude that there was “other sufficient cause”. In considering the issue of the stay, the applicant creditor submitted there should be no stay granted in the present case and that on the material before the court, which it should be noted the court was prepared to accept without the requirement of further updated affidavits of proof of debt or search, that a sequestration order should be made.
In this case in general terms the applicant creditor submitted that there is no basis upon which the court should refuse to make a sequestration order and that the suggestion of an improved solvency position arising from the Family Court appeal is not relevant to the exercise of the courts discretion in this application. During the course of submissions it seemed clear that the disputed property issue which was the subject of a pending appeal in the Family Court, may theoretically relate to the issue of solvency, though if it did so would not of itself be part of what might be described as “other sufficient cause”.
Having considered the issues to be agitated in the Family Court appeal and the material relied upon the respondent debtor, I conclude that there is insufficient evidence in this court to establish solvency and to that extent the respondent debtor has failed to discharge the onus on her in relation to that issue. I further conclude that the pending Family Court appeal, given the nature of the appeal, does not of itself provide any or any proper basis from which this court should further delay or defer consideration of the creditor’s petition and nor does it provide any basis upon which the court should refuse to make a sequestration order. Pending proceedings of that nature are merely speculative and, in my view, it would not be appropriate of the court to either defer the petition or indeed dismiss it on the grounds of that speculative pending appeal in the Family Court.
Ultimately it seemed to me that the only relevance of the pending appeal in the Family Court was the question of whether or not it would support an application for an adjournment of the petition and in my view given the speculative nature of that pending appeal it does not of itself provide any or any proper basis upon which, as indicated earlier, the court should defer consideration of this petition.
It was submitted on behalf of the applicant creditor that any pending complaint by the applicant creditor to the Law Institute is not relevant to this application. It would not of itself provide a basis upon which the court can conclude there is a sufficient or other cause. I agree with that submission. That would appear to be a personal matter between solicitor and client and does not, in my view, provide a proper basis upon which the court could conclude that there is, on that basis alone, other sufficient cause to persuade the court that a sequestration order ought not to be made.
The respondent debtor has expressed a genuine held grievance in relation to the outcome of the Family Court proceedings and to some extent the conduct of the applicant creditor in the lead up to those proceedings. However, neither of those matters, in my view, having regard to relevant authorities in relation to s.52 of the Act provides any or any proper basis upon which the court should refuse a sequestration order. That is, I am not satisfied, on the material before me, despite the voluminous nature of the affidavits which are often repetitive, that the respondent debtor has satisfied me that there is indeed other sufficient cause to justify the refusal to make a sequestration order.
It should further be noted and emphasised that the pending appeal in any event in this case is not an appeal pending in relation to the judgment which is the foundation stone of the petition, and to that extent authorities referred to in the course of submissions are largely irrelevant.
In relation to any cross-claim now sought to be raised, in my view, that does not provide any basis upon which the court should refuse to make a sequestration order. The draft cross-claim in any event is in the name of a company and not in the name of the respondent debtor against the applicant creditor and I am not satisfied that it is in any event a challenge to the judgment which was based upon legal costs. Rather it may be a separate claim which in any event could have been pursued on a much earlier date. It does not however in my view provide any basis upon which the court should refuse the sequestration order.
Ultimately I am satisfied that the applicant creditor has complied with the requirements of s.52 of the Act and that there is no basis upon which the court should refuse a sequestration order or indeed grant any adjournment of this petition. Once having been satisfied it is appropriate in my view to make the sequestration order and a relevant order for costs (See Dowling v Colonial Mutual Assurance Society (1915) 20 CLR 509). I should add that I am satisfied that the applicant creditor has filed the appropriate affidavit material including the affidavit of service and I accept that the petition was appropriately served.
One aspect of this application which caused some concern is the apparent desire on the part of the respondent debtor to pursue an application in the State Magistrates Court but which has not been pursued, although there seems to be some indication that correspondence was received by the court from the respondent debtor. However in the absence of diligent pursuit of any application to set aside the order made on 31 May 2004 I am not prepared to conclude, despite the unfortunate sequence of events relating to the proceedings in the State Magistrates Court, that there is any pending application to set aside the judgment upon which the petition is based. It should also be added that the bankruptcy should not prevent the respondent debtor from pursuing her pending appeal in the Family Court.
It follows that a sequestration order should be made in the usual form.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 28 October 2005
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