State of Victoria v Ahn - [2007] FMCA 1965

FEDERAL MAGISTRATES COURT OF AUSTRALIA

STATE OF VICTORIA v AHN

[2007] FMCA 1965

BANKRUPTCY – Debt owed by respondent – respondent uncertain as to whom debt is owed.

House Contracts Guarantee Act 1987, s.43
House Contracts Guarantee Amendment Act 2005, s.67

Applicant:

STATE OF VICTORIA

Respondent:

CHOONG JE AHN

File number:

MLG 1036 of 2007

Judgment of:

Burchardt FM

Hearing date:

12 November 2007

Date of last submission:

12 November 2007

Delivered at:

Melbourne

Delivered on:

4 December 2007

REPRESENTATION

Counsel for the Applicant Creditor:

Mr S.J. Maiden

Solicitor for the Applicant Creditor:

Lander & Rogers Lawyers

Counsel for the Respondent Debtor:

Mr J.L. Evans

Solicitor for the Respondent Debtor:

Noble Lawyers

THE COURT DELCARES:

That Choong Je Ahn owes the State of Victoria $29,972.80

(“the debt”).
The debt arises from and represents the amount that the Victorian Civil and Administrative Tribunal ordered on 10 December 2004 that Choong Je Ahn pay Shoji Investments Pty Ltd.
The debt is owed solely to the State of Victoria and not to any other person or corporation.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 1036 of 2007

STATE OF VICTORIA

Applicant Creditor

And

CHOONG JE AHN

Respondent Debtor

REASONS FOR JUDGMENT

This case is all about a debt admittedly owed by Mr Ahn. The State of Victoria says he has committed an act of bankruptcy by not paying that debt to it, but he denies this.
In 2000 Mr Ahn sued a company called Shoji Investments Pty Ltd ("Shoji"), arising out of a domestic building contract. He sued for work and labour done, I infer. Shoji counterclaimed for defective works.
On 9 August 2004, Senior Member Walker of the Victorian Civil and Administrative Tribunal (“VCAT”) dismissed Mr Ahn's application and made an Order on Shoji's cross‑claim for about $27,000.00.
Following a further hearing in December 2004, Senior Member Walker on 10 December 2004 varied the judgment to $29,972.80. Mr Ahn was represented by solicitors at the hearing.
Although there is no formal evidence before me to this effect, it is common cause that at this time there was a scheme in place pursuant to which all builders such as Mr Ahn had to have insurance to cover them against the sort of claims that Shoji made. Shoji was thus entitled to an indemnity from Mr Ahn's then insurers, HIH.
In 2005 the House Contracts Guarantee Act 1987 (“HCG Act”) was amended to take account of the HIH debacle. Essentially what happened was that the Housing Guarantee Fund Ltd ("HGFL") was required to indemnify any person who was entitled to an indemnity under an HIH policy. Shoji was of course such a person. They could, absent the HIH collapse, have claimed from HIH the moneys VCAT had ordered Mr Ahn to pay them.
HGFL could not pay the indemnity until the right to recover - in this case, Shoji's right to recover - was assigned to it, because of s.43 of the HCG Act. On 1 April 2005 Shoji purported to assign such rights as it might have against either Mr Ahn or HIH to the State of Victoria. Notice of this assignment was sent to Mr Ahn on 9 May 2005.
In 2005 the House Contracts Guarantee Amendment Act 2005 was passed and that came into operation on 1 January 2006. Effectively that removed the HGFL and replaced it with the Victorian Managed Insurance Authority ("VMIA"). The effect of this legislative amendment was that the VMIA took over the powers and responsibilities of the HGFL and was empowered pursuant to s.67 to continue any act, matter or thing of a continuing nature commenced by HGFL.
Shoji got good value for the release as VMIA has paid Shoji the $29,972.80 VCAT originally ordered Mr Ahn to pay. The date of such payment is not clear, but the matter has proceeded on the basis that the payment has been made.
On 21 December 2005 Mr Ahn was informed of the existence of VMIA and the fact that it had taken over the responsibilities of the HGFL.
On 30 March 2007 the VMIA caused judgment to be entered on behalf of Shoji in the Victorian Magistrates' Court. The judgment debt inserted was the unamended sum originally ordered by Senior Member Walker, which was conceded by counsel to be plainly wrong.

On 2 April 2007 the Court amended the amount and a certified extract of judgment attached to the Bankruptcy Notice reflects the correct amount.
On 1 May 2007 the Bankruptcy Notice was issued and on 15 May 2007 it was posted to Mr Ahn's solicitors, who had already undertaken to accept service. There is no issue that the letter was received.
Following the non‑payment of the debt the Petition was issued on

25 July 2007
and served on 2 August 2007.
There has been very substantial argument before me as to numerous technical issues raised about the validity or otherwise of the Bankruptcy Notice and the application for Sequestration Order generally.
However, during the proceeding counsel for Mr Ahn conceded, as was in any event beyond doubt, that his client owed $29,000.00 to someone. He said that Mr Ahn could not pay this debt as he could not be sure that he would get good discharge for it.
It is common cause that Shoji has been paid the amount ordered to be paid by VCAT and that Mr Ahn has not paid anybody. In these circumstances, I indicated to both counsel during the hearing that if I were to form the clear view that Mr Ahn owed any particular person or party the relevant amount, it might be appropriate for me to issue declaratory relief to that effect.
Counsel for Mr Ahn urged caution in this regard. He said that it might give rise to inconsistency of judgments between the declaration I might make and the Orders of the Victorian Magistrates' Court. Counsel for the Applicant Creditor, the State of Victoria, submitted that this course would be appropriate.
Assuming in Mr Ahn's favour that the reason he has not satisfied the Bankruptcy Notice is some confusion on his part as to whom the money is properly owed, I think it is appropriate to resolve his uncertainty.
It seems clear beyond doubt to me that Mr Ahn owes the State of Victoria the amount of money that has been paid to Shoji, which in effect discharges his obligation to pay Shoji the amount that VCAT ordered him to pay.
I will make a declaration to this effect and otherwise adjourn the proceedings so that the parties can consider their positions.
I would expect that Mr Ahn will pay the State of Victoria the amount concerned within a reasonable period, say 60 days, and the parties will need to sort out between themselves who pays the costs of these proceedings in bankruptcy.
It has not been suggested that I do not have the power to give this declaratory relief. It is plainly highly desirable that, irrespective of the technical issues surrounding the Bankruptcy Notice, legal proceedings between these parties over a relatively small amount of money come to an end.
If I were to dismiss the application for the Sequestration Order, the position would still be that the State of Victoria could sue
Mr Ahn successfully in the Magistrates' Court of Victoria all over again. It is highly undesirable that there be such multiplicity of proceedings.
It will be for the parties to work out between themselves whether the Bankruptcy Notice and the Petition costs should lie. Should they insist, I will give a ruling on all the technical issues that both parties have raised. Both parties should understand that these are not easy issues and both may be at risk. They would do well to compromise.
There will be a declaration that Mr Ahn is indebted to the State of Victoria in the sum of $29,972.80 and that this indebtedness reflects the indebtedness to Shoji ordered by VCAT on 10 December 2004. The declaration will also include that the indebtedness is not owed to Shoji or any other persons concerned with that litigation or subsequent events.
This has the advantage for Mr Ahn that he can discharge his debt, as I infer he is both able and willing to do, and it will have the very desirable effect of bringing all the proceedings arising out of this otherwise rather convoluted and complex affair to an end.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate: Brooke Evans

Date: 4 December 2007