Sriram v The Owners - Strata Plan No 5015

[2020] FCCA 2711

FEDERAL CIRCUIT COURT OF AUSTRALIA

SRIRAM v THE OWNERS - STRATA PLAN NO 5015 [2020] FCCA 2711

Catchwords:
BANKRUPTCY – Creditor's petition – application for review of Registrar’s sequestration order – body corporate debt for home unit – service – no matters of principle – application dismissed.

Legislation:

Bankruptcy Act 1966 (Cth), ss.40, 43

Bankruptcy Regulations 1996 (Cth), r.16.01

Federal Circuit Court Rules 2001 (Cth), r.6.14

Cases cited:

Van Stappen v Mackenzie[2008] NSWSC 307

Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321; (2004) 141 FCR 107

Applicant: ANITHA LAKSHMI SRIRAM

Respondent: THE OWNERS - STRATA PLAN NO 5015

File Number: LNG 37 of 2019

Judgment of: Judge Riethmuller

Hearing date: 3 June 2020

Date of Last Submission: 4 June 2020

Delivered at: Townsville

Delivered on: 30 September 2020

REPRESENTATION

The Respondent appeared in person.

Solicitors for the Applicant: CCA Legal Pty Ltd

ORDERS

1. The Application filed 16 December 2019 for review of the Registrar’s decision be dismissed.

2. The Respondent’s costs be paid from the Applicant’s (the bankrupt) estate in such sum as is agreed by the Trustee AND failing agreement, as assessed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT HOBART

LNG 37 of 2019

ANITHA LAKSHMI SRIRAM

Applicant

And

THE OWNERS - STRATA PLAN NO 5015

Respondent

REASONS FOR JUDGMENT

Overview

1. The applicant applied for a review of a sequestration order made against her by a Registrar on 10 October 2019. Reviews of decisions of Registrars of the court proceed by way of de novo hearing on the merits of the application. As a result, there is no need to consider the reasons given by the Registrar in this matter. I proceed on the basis that the respondent to the review application bears the relevant onus.

2. The debt upon which the bankruptcy proceedings is based arises out of the applicant’s failure to pay the respondent her body corporate fees with respect to real property situate in New South Wales. Summary judgments were entered against her in July 2018 and March 2019 in the Small Claims division of the Local Court in New South Wales (‘NSW’) for sums totalling over $10,000. The applicant has never paid the outstanding judgments, nor applied to set them aside.

3. The applicant was served with a Bankruptcy Notice on 23 March 2019 in accordance with regulation 16.01(1)(c) of the Bankruptcy Regulations 1996 (‘the Regulations’) by leaving it at the applicant’s last known address, being 96 Hampden Road, South Wentworthville NSW. Whilst the applicant alleges that she was overseas at that time, service is still effective as a result of reg.16.01(2): see Van Stappen v Mackenzie[2008] NSWSC 307 at [33] and Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321; (2004) 141 FCR 107 at [25]).  

4. As the applicant did not pay the debts identified in the Bankruptcy Notice, she committed an act of bankruptcy on 15 April 2019: see section 40(1)(g) of the Bankruptcy Act 1966 (Cth) (‘the Act’).

Procedural Background

1. Pursuant to s 43 of the Act the respondent creditor filed a Creditor’s Petition on 23 April 2019 on the grounds that the debtor, the applicant in this proceeding, owed a debt of $10,043.81, made up of outstanding judgment amounts owing ($4,311.81 in unpaid levies from a summary judgment made in a Local Court New South Wales on 4 July 2018 and $3,895.38 in unpaid levies arising from a summary judgment dated 14 March 2019 in the small claims division), as well as costs incurred after Judgment, being $792.30, interest of $304.92 and levies of $739.40. The Creditor’s Petition was supported by a written consent of a trustee to act document, signed 23 April 2019. The respondent filed another copy of the Creditor’s Petition on 4 July 2019.

2. On 12 September 2019 the Registrar adjourned the petition to 10 October 2019. On 10 October 2019 the respondent filed an Affidavit sworn by licensed commercial agent Mr Stephen Ecob setting out that a search of New South Wales Land Titles Index in late 2018 had shown a person with the applicant’s name owned property situate at 96 Hampden Road, South Wentworthville and that she lived at that address at that time.  A solicitor acting for the respondent also filed an Affidavit setting out that on 4 July 2019 she had served the applicant with the Creditor’s Petition and supporting documents be email.  Importantly, the applicant had emailed the respondent acknowledging receipt of the documents and stating that she would ‘fix the arrangements payment’ when returning from India. Payment of the underlying debts has never been made.

3. On 10 October 2019 Registrar Stone made orders for personal service of the Creditor’s Petition to be dispensed with and the estate of the applicant be sequestrated pursuant to the Act. This order was not the subject of review by the applicant, and in any event she is now well aware of the Creditor’s Petition, as she has filed a review application.

4. The court noted the date of the act of bankruptcy be 15 April 2019. An order was made for the creditor’s costs fixed in the sum of $5,579.00 to be paid from the estate of the applicant.

5. In a letter to the creditors in November 2019 the Trustee set out that at the date of bankruptcy the applicant was the registered owner of a strata titled unit situated at 2/47 Burlington Road, Homebush in New South Wales and the aforementioned residential property at 96A Hampden Road, South Wentworthville in the same state. The Homebush property was subject to a mortgage in favour of St George Bank with an outstanding balance of $578,600.00 that was in arrears by approximately $63,746. The property was also subject to two caveats. At that time the property was tenanted but the trustee was unable to secure rental payments, the trustee noted this property encumbrances greater than its underlying value. The other property was subject to a mortgage, also with St George bank, with an outstanding balance of $902,000 including arrears of $107,000 and two caveats, also encumbered for sums greater than its value.

6. On 16 December 2019 the applicant filed a Notice to Creditors seeking review of the Registrar’s decision to make the sequestration order. The applicant filed an associated Affidavit in which she set out that she had not been served with any documents, was out of the country (living in India) and that her daughter had a health condition.

7. On 2 June 2020 the respondent filed a Report to Creditors with a further update to the November 2019 letter, setting out that the applicant was living in India and seeking medical attention for her child. The trustee also documented the assets owned by the applicant, being the two aforementioned properties, had since been repossessed by Westpac Bank as mortgagee. The estate summary provided set out that the applicant’s debts were estimated to exceed her assets by $355,017.00.

Hearing

1. The matter was heard before me on 3 June 2020, the applicant was in India at the time of hearing and the matter proceeded by phone due to Covid-10 related arrangements. Both the applicant and her husband were on the phone and the husband spoke mainly on her behalf due to the applicant’s limited English skills. The applicant confirmed in oral submissions that the property related to the body corporate fees had since been vacated and that she was in the process of giving the keys to the bank that holds the mortgage. Aside from complaints with respect to service, the applicant had no evidence of solvency.

2. The respondent filed an Affidavit of Debt the following day in a document sworn by Mr Ecob, affirming the sum of $10,043.81 was still owing. The respondent has also filed the appropriate Affidavits of Search.

Submissions

1. The applicant’s oral submissions were in essence that she was not in the country at the time of service of the Bankruptcy Notice and act of bankruptcy. The applicant’s husband explained that they were in the process of trying to sell the applicant’s overseas property (family house and land, presumably in India) to pay off the debts they owed in Australia.

2. The applicant’s husband also explained that he and the applicant were waiting on an operation scheduled on 15 June this year for their daughter, he said they needed to care for her and that they do not have family in Australia. He said that the applicant intended to pay the outstanding debts within the year.

3. The respondent sought that the review be dismissed.

Findings

1. In this matter the review is a de novo review of the Registrar’s order. The respondent has established that the Bankruptcy Notice was serviced in accordance with reg 16.01 by delivery to the applicant’s last known address. There is no dispute that this was her last known address, nor any dispute that the Bankruptcy Notice was delivered to this address. As set out above, whether the applicant received the notice after delivery to the address does not invalidate the act of service under reg 16.01. There is nothing to suggest that the respondent was aware that the applicant had not received the Bankruptcy Notice, nor any other matters that could arguably impugn the respondent’s reliance upon reg 16.01 in the circumstances of this case.

2. As the applicant did not pay the debt as demanded in the Bankruptcy Notice, she committed an act of bankruptcy. This appropriately founded the Creditor’s Petition that was filed by the respondent.

3. Whilst the Creditor’s Petition was not served personally, personal service can be dispensed with pursuant to r 6.14(1) of the Federal Circuit Court Rules 2001. In this case there is evidence that the applicant received the documents and acknowledged receipt by email. The purpose of the rules relating to service is to ensure that a person has notice of proceedings. Personal service of the applicant in India was impractical, and in light of the email also unnecessary in order to ensure that the applicant had received the Creditor’s Petition and supporting documents. I too would dispense with personal service of the Creditor’s Petition in the circumstances of this case.

4. The applicant has not shown that she is solvent, indeed the evidence that she is insolvent is strong. The debt remains unpaid, even though there is no claim that there is a defence or cross-claim by the applicant against the respondent.

5. The formal matters (such as Affidavits of search and consent by the trustee to act) have been complied with by the respondent.

6. I am satisfied that a sequestration order ought to have been made, as ordered by the Registrar.

7. In the circumstances I therefore dismiss the applicant to review the Registrar’s orders and make order that the respondent’s costs be met from the estate.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller

Associate: 

Date: 30 September 2020