Smith v Varley
[2006] FMCA 1572
•17 October 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SMITH v VARLEY | [2006] FMCA 1572 |
| BANKRUPTCY – Application under s.50 Bankruptcy Act to appoint a trustee over the alleged debtor’s estate − whether sufficient grounds to warrant making the order. |
| Bankruptcy Act 1966, s.50 |
Re Penning and Anor; Ex Parte State Bank of South Australia & Anor (1989) 89 ALR 417
| Applicant: | KATIE SMITH |
| Respondent: | SONYA GAYE VARLEY |
| File Number: | SYG 2784 of 2006 |
| Judgment of: | Raphael FM |
| Hearing date: | 17 October 2006 |
| Date of Last Submission: | 17 October 2006 |
| Delivered at: | Sydney |
| Delivered on: | 17 October 2006 |
REPRESENTATION
| Solicitors for the Applicant: | Ms K. Britton Sally Nash & Co |
| Counsel for the Respondent: | Mr R. Johnson |
| Solicitors for the Respondent: | Edwards Legal Services |
ORDERS
Application dismissed.
Applicant to pay the respondent’s costs assessed in the sum of $600.00 pursuant to Part 21 Rule 21.02(2)(a) of the Federal Magistrates Court Rules 2001.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2784 of 2006
| KATIE SMITH |
Applicant
And
| SONYA GAYE VARLEY |
Respondent
REASONS FOR JUDGMENT
There comes before me an application under s.50 of the Bankruptcy Act 1966 (“the Act”). Section 50 is a section which provides a creditor with the ability to obtain some of the benefits of a sequestration order prior to that order being made by the court. In particular, it allows a creditor to make an application after a bankruptcy notice has been served and not complied with for the appointment of a trustee over the assets of an alleged debtor.
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: Re Penning and Anor; Ex Parte State Bank of South Australia & Anor (1989) 89 ALR 417 as per von Doussa J at [425].
In this particular case, I am provided with an affidavit of Ms Britton, the solicitor for the applicant, who deposes to a judgment in her client’s favour of some $45,000.00-odd and exhibits a letter which indicates that the debtor is the proprietor of particular property which had been advertised for sale. The debtor is also the proprietor of a business carried out in Woy Woy.
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 Ms Britton’s application, but I have no such evidence. On the contrary, I have evidence that Ms Britton’s client has lodged a caveat against the property and so she is completely protected as any sale of the property which might come about cannot be completed without the caveat being lifted.
Ms Britton said that her client is acting in the interest of “all the creditors”. I am sure that she is but we have no evidence at all about the situation in regard to any other creditors of this particular debtor. She does operate a business. She may have creditors of the business. On the other hand, she may have debtors of that business. I do not know and whilst I do not know I do not believe that it is appropriate that I should make a very serious order such as that requested by the applicant.
Mr Johnson appears on behalf of the debtor. When the matter was first called upon this morning he had very little in the way of instructions. By this afternoon he was able to produce to the court an application to set aside the judgment which is the subject matter of the bankruptcy notice. As Ms Britton points out, an act of bankruptcy has already occurred and setting aside the judgment may not avail, particularly if there are other creditors, one of whom at least is prepared to be substituted.
Given the efficiency with which I know Ms Britton and her firm works, I am sure that a bankruptcy petition will be filed in this court very soon. It will receive a hearing date and at that time any concern that the applicant has about the debtor’s assets can be re-agitated.
The applicant has been unsuccessful in this application. Mr Johnson appeared only to ask for an adjournment but has received the benefit of this decision. It is appropriate that the applicant pay the respondent’s costs which I am prepared to assess. I assess those costs in the sum of $600.00.
I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Raphael FM.
Associate:
Date:
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