Rose v Majak (No 2)
[2022] FedCFamC2G 1025
Federal Circuit and Family Court of Australia
(DIVISION 2)
Rose v Majak (No 2) [2022] FedCFamC2G 1025
File number(s): SYG 1133 of 2022 Judgment of: JUDGE CAMERON Date of judgment: 1 December 2022 Catchwords: BANKRUPTCY – Creditor’s petition – insolvency. Legislation: Bankruptcy Act 1966 (Cth) ss 43, 52
Bankruptcy Regulations 2021 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth)
Cases cited Sandell v Porter (1966) 115 CLR 666 Division: Division 2 General Federal Law Number of paragraphs: 17 Date of hearing: 1 December 2022 Place: Sydney Counsel for the Applicant: Mr G. McDonald Solicitor for the Applicant: Byrnes Legal For the Respondent: The respondent appeared in person ORDERS
SYG 1133 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF ZOFIA MAJAK
BETWEEN: ALAN WESLEY ROSE
Applicant
AND: ZOFIA MAJAK
Respondent
order made by:
JUDGE CAMERON
DATE OF ORDER:
1 December 2022
THE COURT ORDERS THAT:
1.A sequestration order be made against the estate of Zofia Majak.
2.The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
THE COURT NOTES THAT:
1.The date of the act of bankruptcy is 15 July, 2022.
2.A consent to act as trustee signed by Andrew Barnden has been filed in Court.
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 Cameron
Introduction
On 4 August 2022 the applicant, Mr Rose, presented a creditor’s petition seeking a sequestration order against the estate of the respondent, Ms Majak, on the ground that she had failed to comply, on or before 15 July 2022, with the requirements of a bankruptcy notice BN254429 (“Bankruptcy Notice”) served on her on 22 October 2021. The Bankruptcy Notice required Ms Majak to pay Mr Rose $30,000, being costs ordered in proceedings in the Family Court of Australia (“Family Court”). On 8 July 2022, an order was made in this Court extending to 15 July 2022 the time for Ms Majak to satisfy the Bankruptcy Notice. The judgment debt grounding the bankruptcy notice remains outstanding, it would seem.
In the creditor’s petition, rather than relying on the debt cited in the Bankruptcy Notice, Mr Rose alleged that Ms Majak owed him $67,638.33 arising out of a $184,166.25 judgment of the District Court of New South Wales (“District Court”) in his favour on 15 November 2019. The $67,638.33 pleaded in the creditor’s petition was said to be the outstanding balance of that judgment debt and Ms Majak has not advanced an argument or led any evidence to suggest that that is a misstatement.
In her grounds of opposition, Ms Majak alleged that she is solvent, although her assets are not presently liquid. Specifically, she alleged:
1. The Respondent is able to pay the debt and is not insolvent, but all her assets are detained by the Applicant who is holding 50% of the property at … that was to be transferred to the Respondent unincumbered, [sic] according to the Family Court orders from 21/12/2019.
2. The Respondent filed a Statement of Claim against the Applicant in the Supreme Court of NSW in relation to the property co-owned with the Applicant, which had the strata scheme registered on the title based on wrong plans of subdivision. Subsequent to the issues arising from the registration of the wrong plans and Applicant's refusal to deal with the water damage, the property that was to be transferred to the Applicant is not realisable.
3. The Applicant obtained orders from the Family Court for the appointment of a receiver and could sell the property at …, except the property is not sellable.
RElevant Legislation
The relevant statutory provisions are ss.43 and 52 of the Bankruptcy Act 1966 (Cth) (“Act”), which provide:
43 Jurisdiction to make sequestration orders
(1) Subject to this Act, where:
(a) a debtor has committed an act of bankruptcy; and
(b) at the time when the act of bankruptcy was committed, the debtor:
(i)was personally present or ordinarily resident in Australia;
(ii)had a dwelling‑house or place of business in Australia;
(iii)was carrying on business in Australia, either personally or by means of an agent or manager; or
(iv)was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.
(2)Upon the making of a sequestration order against the estate of a debtor, the debtor becomes a bankrupt, and continues to be a bankrupt until:
(a) he or she is discharged by force of subsection 149(1); or
(b)his or her bankruptcy is annulled by force of subsection 74(1) or 153A(1) or under section 153B.
...
52 Proceedings and order on creditor’s petition
(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.
(1A)If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver before the end of the period of 2 days beginning on the day the order was made.
(1B) Subsection (1A) is an offence of strict liability.
(2)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.
Background Facts
Notwithstanding the lengthy nature of the parties' submissions, both written and oral, the issues presented for consideration today do not require lengthy reasons.
The threshold question is whether Ms Majak can pay her debts as and when they fall due by assets realisable in a relatively short time: Sandell v Porter (1966) 115 CLR 666 at 670.
The parties have been involved in a multiplicity of proceedings which were discussed at some length today. Two of the disputes in which the parties have been involved are particularly important to present considerations, namely:
(a)property proceedings in the Family Court and subsequent proceedings in that court in its guise as the Federal Circuit and Family Court of Australia (Division 1);
(b)Supreme Court of New South Wales (“Supreme Court”) proceedings related to apprehended violence orders (“AVO”) made in the Local Court of New South Wales (“Local Court”) at various registries and associated appeals and costs associated with those various proceedings.
I will return to these cases shortly.
Amongst the arguments raised by Ms Majak in opposition to the creditor's petition was an assertion that the present proceeding had been brought for a collateral purpose, namely, to prevent her from pursuing her rights in the family law proceedings. For the following reasons, I am not persuaded that the matter was brought in order to prevent further steps in the family law proceedings, although that is likely to be one of the consequences of a sequestration order. The evidence given today by the applicant's solicitor, Mr Byrnes, was to the effect that over time, the District Court judgment was reduced by garnisheeing Ms Majak's salary. However, Ms Majak retired from her employment at the end of last year, making garnisheeing her salary no longer possible. Mr Byrnes said that he had tried to garnishee Ms Majak's bank account but was unsuccessful as there were no funds in it. I accept that, in the circumstances, the present proceeding is the most obvious course by which Mr Rose can obtain payment of the sums he is owed.
It was also argued by Ms Majak that she was owed certain sums by Mr Rose, but it was not demonstrated that any such amounts would have had any material effect on the outstanding remainder of the District Court judgment debt or, if they could be offset against that debt, that they would being the net debt below the statutory minimum. On the other hand, however, there is evidence that Ms Majak owes Mr Rose more than the amount sought in the creditor's petition.
Consideration
I am satisfied that Ms Majak committed an act of bankruptcy and that the debt alleged in the creditor's petition remains outstanding. I am satisfied of all the matters of which the Act, the Bankruptcy Regulations 2021 (Cth) and the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) require me to be satisfied.
The issue which now emerges is whether a sequestration order should not be made.
When determining whether a party can pay their debts as and when they fall due from readily available resources, the Court is entitled to the fullest and best evidence of the party's alleged solvency. However, in this case, the Court has not been provided with particulars of Ms Majak's income or expenses, with particulars of what I assume would have been a voluntary redundancy payment when she retired from the public service last year, or with particulars of any assets other than the property which is the subject of the family law dispute. Reference was made to a bullion holding, but the account paperwork annexed to Ms Majak's affidavit is not in her name and there is no evidence of how the bullion's value might be made available to her, or when it would be.
The family law property proceedings relate to the only asset of significant value apparently attaching to Ms Majak, however, that asset is now in the hands of a receiver and there is no indication of when it will be available to Ms Majak to sell or mortgage. There are also disputes concerning further work to the property and in relation to its strata plan. I am not persuaded that there is any real likelihood of this asset becoming available for application to the balance of the District Court judgment debt at a sufficiently early date that it could be said that its existence demonstrated that Ms Majak was solvent.
The Supreme Court proceedings concern costs of AVO proceedings in the Local Court and related appeals in the District Court and Ms Majak says that, if she were successful, she should be awarded damages which would exceed what she presently owes the applicant. I have read the Supreme Court statement of claim and found that a difficult exercise. It would seem, with respect, that the Supreme Court judge dealing with the matter has also found the matter one of some difficulty, as judgment has been reserved since April. The parties have not indicated that his Honour has advised a date for the delivery of judgment and one cannot know when his Honour will finalize his considerations. That being so, one cannot conclude, even if Ms Majak were to be successful in that proceeding, that she would be so in a time frame that would indicate solvency. I do not consider that the Supreme Court proceedings provide a basis on which it could be concluded that Ms Majak was solvent.
Ms Majak has also indicated that she proposes to seek constitutional writs in the High Court for review of the decisions of the Federal Circuit and Family Court of Australia (Division 1) in her case. However, I am told that no application of that sort has been filed and it would not be appropriate to adjourn this matter to permit that to be done at this point, given that such proceedings could have been filed by now or at least readied, or appropriate to delay the relief to which the applicant is entitled.
Conclusion
I am satisfied that the respondent committed an act of bankruptcy and that the debt alleged in the creditor's petition remains outstanding.
The Court notes that the date of the act of bankruptcy is 15 July 2022. The Court also notes that a consent to act as trustee, signed by Andrew Barnden, has been filed with the Court.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 7 December 2022
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