Southage Pty Ltd v Phillips - [2015] FCCA 2800

FEDERAL CIRCUIT COURT OF AUSTRALIA

SOUTHAGE PTY LTD v PHILLIPS

[2015] FCCA 2800

Catchwords:
BANKRUPTCY – Review of sequestration order.

Legislation:
Corporations Act 2001 (Cth) s.925E(2)
Property Law Act 1958 (Vic) s.25
Settled Land Act 1958 (Vic)
Bankruptcy Act 1966 (Cth) s.52

Applicant:

SOUTHAGE PTY LTD
(ACN 050 240 965)

Respondent:

STEVE PHILLIPS

File number:

MLG 845 of 2015

Judgment of:

Judge Riley

Hearing date:

9 September 2015

Date of last submission:

9 September 2015

Delivered at:

Melbourne

Delivered on:

9 September 2015

REPRESENTATION

Advocate for the applicant:

Bill Velos

Solicitors for the applicant:

Velos Lawyers

Counsel for the respondent:

The respondent appeared in person

Solicitors for the respondent:

The respondent was not represented

ORDERS

The application for review filed on 14 August 2015 be dismissed.
The orders of the Registrar made on 28 July 2015 be affirmed.
The petitioning creditor’s costs of the application to review be paid out of the bankrupt estate in accordance with the Bankruptcy Act 1966.

FEDERAL CIRCUIT
COURT OF AUSTRALIA AT
MELBOURNE

MLG 845 of 2015

SOUTHAGE PTY LTD

(ACN 050 240 965)

Applicant

And

STEVE PHILLIPS

Respondent

REASONS FOR JUDGMENT

(revised from the transcript)

This is an application for review of orders that were made by a registrar of this court on 28 July 2015. On that day, a sequestration order and some other ancillary orders were made. The court noted that the date of the act of bankruptcy was 7 April 2015. The applicant has sought review of the sequestration order by an application filed on
15 August 2015.
The history of the matter is that a bankruptcy notice was issued and personally served on the debtor on 22 September 2014. It was based on a judgment of the Court of Appeal of the Supreme Court of Victoria for costs. Those costs were taxed on 31 March 2014 in the sum of $18,881.74. That is the sum set out in the bankruptcy notice.
Following service of the bankruptcy notice, the debtor filed an application to stay the proceedings under the bankruptcy notice. That application was filed on 13 October 2014 and was heard by a registrar on 21 October 2014. The registrar dismissed the application to stay the proceedings under the bankruptcy notice and ordered the debtor to pay the petitioning creditor’s costs of the proceeding to be taxed.
On 10 November 2014, the debtor filed an application to review the registrar’s decision refusing the stay application. That application to review was heard by Judge Burchardt of this court on
17 December 2014. Judgment was handed down on 13 February 2015. His Honour dismissed the application for review of the registrar’s decision and ordered the plaintiff to pay the petitioning creditor’s costs.
The applicant then appealed from Judge Burchardt’s decision to the Federal Court. That appeal was heard by Davies J. Her Honour handed down her decision on 7 April 2015. The decision was that the appeal be dismissed and the debtor pay the creditor’s costs of the appeal.
The debtor applied to the High Court for special leave to appeal against the decision of Davies J. The High Court refused special leave by a decision dated 3 September 2015.
Following the decision of Davies J, on 28 July 2015, a registrar of this court made the sequestration order the subject of this review application. The sequestration order was based on a creditor’s petition that was issued on 20 April 2015. There is evidence before the court that the creditor’s petition was personally served on the debtor on
30 April 2015.
Before the court today is an affidavit of debt and search. The affidavit of debt says that each debt on which the applicant relies is still owing in full. The deponent of that affidavit appeared for the creditor today and said that meant that the debt referred to in the bankruptcy notice is still owing in full. I accept that that is the case. Certainly, the debtor did not suggest that the debt had been paid.
There is also an affidavit verifying paragraph 4 of the creditor’s petition, being an affidavit sworn on 20 April 2015 by Bill Velos.
I note that the registrar, when making the sequestration order, stated that the date of the act of bankruptcy was 7 April 2015, rather than the date specified in the creditor’s petition as the date of the act of bankruptcy, being 20 April 2015. That is because the compliance with the bankruptcy notice had previously been extended by court order up until the date when the appeal from Judge Burchardt was resolved and that date was 7 April 2015. It seems to me that it was correct that the registrar substituted that date for the date set out in the creditor’s petition.
The judgment that underlies the bankruptcy notice was a costs order made by a taxing master in the Supreme Court. The Court of Appeal had ordered the debtor to pay the costs of an application that he had brought in the Supreme Court. The Court of Appeal’s order was made on 9 August 2013. The taxation occurred on 31 March 2014.
The Supreme Court case concerned a property in Brunswick Street. The debtor had a life interest in that property. The property was sold to a company called Beijing Garden Resort Pty Ltd. Beijing Garden Resort then borrowed money from the petitioning creditor in this proceeding, being Southage Pty Ltd.
The debtor has participated in a number of proceedings concerning the property, including a judgment in the Supreme Court given by
Vickery J. In that case, the plaintiff was Southage Pty Ltd, the petitioning creditor in this case. There were eight defendants. The first was Beijing Garden Resort Pty Ltd. The second was the debtor in this proceeding. There were a number of other defendants who, I understand, are various relatives or other associates of the debtor and the Registrar of Titles. Vickery J ordered that certain caveats that had been placed on the property be removed.
The matter was then taken on appeal to the Court of Appeal which upheld Vickery J’s decision and, as previously mentioned, ordered the debtor to pay the costs of Southage Pty Ltd. Following the Court of Appeal’s decision, the debtor sought special leave to appeal to the High Court. That application was dismissed.
The courts previously have noted that the debtor was bankrupted in 2006 and discharged from that previous bankruptcy in 2011.
The debtor’s bankruptcy was extended on that occasion beyond the customary three years.
The application to this court asks that the registrar’s orders made on 28 July 2015 be reviewed. The application also asks that these proceedings be stayed, pending the High Court’s determination of the special leave application from the decision of Davies J. Clearly, the High Court has now determined that application and resolved it, contrary to the debtor’s position, so that aspect of the claim to this court is no longer live.
The debtor submitted that the underlying debt was unlawfully obtained and should be rendered null and void. The argument in support of that position was that the petitioning creditor, Southage Pty Ltd, was not permitted to lend funds. The debtor relied upon s.925E(2) of the Corporations Act 2001 (Cth) which provided that a non-licensee is not entitled, as against a client, to enforce an agreement, whether directly or indirectly or to rely on the agreement, whether directly or indirectly and whether by way of defence or otherwise. The debtor provided extracts from a website hosted by the Australian Securities and Investment Commission, which showed that Lendlaw, which is somehow associated with this matter, and Southage Pty Ltd, the petitioning creditor, were not listed on the ASIC database as licensed credit providers.
The petitioning creditor responded to that argument saying that there was no restriction on lending money to a corporation. The petitioning creditor said that while people or entities who lend money to natural persons need to be licensed, it is not necessary for an entity that lends money to corporations to be licensed.
This issue was dealt with by Davies J. Her Honour said that Judge Burchardt had dealt with this issue correctly in his decision.
The statement by his Honour was that any claim that might have been set up was a claim to be made by Beijing Garden Resort and not by the debtor, as the moneys were not lent to him. Davies J considered that there was no error in that reasoning and indicated that she agreed
with it.
Her Honour also noted that orders had been made by consent in the Supreme Court of Victoria for Beijing Garden Resort to repay the moneys lent by the petitioning creditor in this proceeding, and it was the failure of Beijing Garden Resort to repay those moneys that founded an order for possession and the issue of a warrant for possession. Her Honour said that any claim that the loan was unenforceable was a claim to be made by Beijing Garden Resort, which had borrowed the moneys from the petitioning creditor; it was not a claim that could be made by the debtor. That seems to me to cover that issue.
The debtor has also said today that he was a life tenant of the relevant property. However, again, that was an issue that was dealt with by Davies J. In paragraph 6, her Honour said:
Mr Phillips claimed to have a life interest in the property at 29 Brunswick St Fitzroy under his mother’s will and asserted a claim for damages against the respondent for wrongfully taking possession of and selling the property, which secured the repayment of a loan made by the respondent to Beijing Garden Resort Pty Ltd.
Her Honour noted the judgment of Vickery J in the Supreme Court and noted that, at paragraph 56 of that judgment, Vickery J had rejected the claim that the debtor had a present life interest in the property. Vickery J gave two reasons for that. The first was that, at best, the debtor may once have had a defeasible life interest in the property, which was to end upon a certain person attaining 25 years of age. The second was that the property was no longer an asset of the estate created under the will by reason of the fact that the executors had sold the property to Beijing Garden Resort.
Davies J also noted that Vickery J’s decision was one of two decisions in respect of which the Court of Appeal had refused to grant the debtor an extension of time in which to appeal. It seems to me that the argument now sought to be advanced has been dealt with time and again by the courts and it has been resolved contrary to the debtor’s position.
The debtor also claimed today that, under s.25 of the Property Law
Act 1958, he had an interest in the land as a person in possession.
He claimed that he was given the right of possession by his mother. However, as courts have previously explained, he lost that right.
The debtor also raised an argument under the Settled Land Act 1958 to the effect that he was a tenant for life. He said such tenancies go with the land and prevail over any sale of land. That argument is not consistent with the decision of Vickery J which has been upheld by the Court of Appeal and in respect of which the High Court has refused special leave. It is also not consistent with the judgment of Davies J in respect of which the High Court has refused special leave.
The applicant said that he wanted a stay of the bankruptcy so that he could commence proceedings in the Supreme Court of Victoria to raise new evidence. As I understand it, he wishes to run in the Supreme Court the argument under s.925E(2) of the Corporations Act 2001.
It does not seem to me that that is new evidence in any relevant sense. It was information that either was known to the debtor or could have been ascertained by him. It is not a new circumstance. It is really no more than a new argument. I cannot see any basis upon which the debtor could be allowed now to run a new argument along the lines that he has mentioned in the Supreme Court of Victoria.
The debtor has also raised the issue that the property in Brunswick Street has been sold by the creditor as the mortgagee of that property. The debtor said there is a surplus and the debtor wants to know where that surplus is. Mr Velos swore an affidavit on behalf of the petitioning creditor on 23 July 2015 that said in paragraph 11 that the present director of Beijing Garden Resort has instructed Mr Velos not to enter into any communication with or give any information to the debtor in relation to Beijing Garden Resort or its affairs. The basic position is that any surplus from the sale of the property belongs to Beijing Garden Resort as the mortgagor and not to the debtor.
The debtor also told the court today that he seeks damages against the petitioning creditor. This seems to be based on the fact that the debtor has been excluded from the property for three years. However, there was a warrant for possession removing him from the property. That appears to have been in accordance with proper legal process. There does not appear to be any basis upon which the debtor can claim a right to possession of the land. Therefore, there does not seem to be any proper basis upon which he can claim damages for not being able to occupy the land over the last three years.
In applications of this type seeking to set aside a sequestration order, the court also needs to consider the solvency or otherwise of the debtor. The applicant has provided an affidavit dealing with his financial position. He said that he is a pensioner. He said that he had a debt to Centrelink of $460, which he said, since swearing his affidavit, he has discharged. He also said that there was a gas bill in respect of the property which is actually the responsibility of Mr Velos, who appeared for the petitioning creditor today. Otherwise, he said that he owes the money claimed in the bankruptcy notice to the petitioning creditor. As mentioned, that is about $18,000.
In addition, the debtor said that he has the skills and knowledge to earn money if he chose to pay the creditor. He told the court that he is 65, but is nevertheless able to work.
The petitioning creditor told the court that, in addition to the $18,000 to be paid by the debtor to the petitioning creditor pursuant to the orders of the taxing master made on 31 March 2014 and in respect of the Court of Appeal proceeding, there are numerous other costs orders. These include the costs of Vickery J’s decision in the Supreme Court, the costs of the proceeding before Judge Burchardt and the costs of the proceeding before Davies J.
The petitioning creditor said that those costs have not been taxed because taxation of costs is an expensive undertaking. However, it was submitted that those costs would be substantial.
It seems to me to be unlikely that the debtor would be solvent. The costs of this court and the Federal Court would probably be fairly substantial if they were taxed. In any event, regardless of the solvency issue, it does not appear to me that the debtor has advanced any argument today that would lead the court not to make a sequestration order.
The relevant matters have been established by the petitioning creditor in the various affidavits under s.52 of the Bankruptcy Act 1966 (Cth). Upon the proof of the relevant matters, the court may make a sequestration order under s.52(2) of the Bankruptcy Act 1966 (Cth). If the court is not satisfied with the proof of any of those matters or is satisfied by the debtor that he or she is able to pay his or her debts or that, for any other sufficient cause, a sequestration order ought not to be made, the court may dismiss the petition.
In this particular case, I am satisfied by the petitioning creditor of the relevant matters and I am not satisfied by the debtor that there is other sufficient cause for a sequestration order not to be made. Consequently, the application for review will be dismissed and the orders of the registrar on 28 July 2015 will be affirmed.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Riley.

Associate:

Date: 15 October 2015