Taiaroa v Thomas

Case [2021] FedCFamC2G 28

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Taiaroa v Thomas [2021] FedCFamC2G 28

File number(s): MLG 887 of 2020
Judgment of: JUDGE MCNAB
Date of judgment: 10 September 2021
Catchwords: BANKRUPTCY – review of a registrar’s decision – application to set aside sequestration order – hearing de novo – no reason to go behind the judgment which forms the basis of the bankruptcy notice – respondent does not have a reasonably arguable cross-claim to justify adjourning the creditor’s petition – respondent is insolvent – application for review dismissed – sequestration order made – applicants’ and supporting creditor’s costs to be taxed and paid from the estate of the respondent.
Legislation:

Bankruptcy Act 1996 (Cth) ss 43, 52.

Federal Circuit Court of Australia Act 1999 (Cth) s 104.

Federal Circuit Court Rules 2001 (Cth) r 20.03.

Limitation of Actions Act1974 (Qld) s 10AA.

Uniform Civil Procedure Rules 1999 (Qld) r 671.

Cases cited:

Australia and New Zealand Banking Group Ltd v Foyster [2000] FCA 400

Bechara v Bates [2021] FCAFC 34

Bryant v Commonwealth Bank of Australia (1994) 217 ALR 251

Conlan v Mladenis [2007] FCA 1129

Sandell v Porter [1966] HCA 28

Stratton v Bowles (No.2) [2015] FCA 43

Thomas v Taiaroa & Anor [2020] FCCA 3524

Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28
Division: Division 2 General Federal Law
Number of paragraphs: 51
Date of last submission/s: 14 April 2021
Date of hearing: 14 April 2021
Place: Melbourne
Counsel for the Applicants: Mr Trewavas
Solicitor for the Applicants: DSA Law Pty Ltd
The Respondent: Appearing in Person
Supporting Creditor: SLF Lawyers

ORDERS

MLG 887 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

KERI TAIAROA

First Applicant

LLL NOMINEES PTY LTD

Second Applicant
AND:

LUKE THOMAS

Respondent

ORDER MADE BY:

JUDGE MCNAB

DATE OF ORDER:

10 SEPTEMBER 2021

THE COURT ORDERS THAT:

1.The application for review filed by the Respondent on 15 February 2021 be dismissed.

2.The estate of Luke Andrew Thomas be sequestrated under the Bankruptcy Act 1996 (Cth).

3.The Applicants’ costs, and the Supporting Creditor’s costs, including reserved costs, be taxed and paid from the estate of the Respondent debtor in accordance with the Bankruptcy Act 1966.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review 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 McNab:

INTRODUCTION

  1. By an interlocutory application filed on 15 February 2021, the Respondent seeks, pursuant to s104 of the Federal Circuit Court of Australia Act 1999 (Cth) (“the FCCA Act”), to review a decision of the Court (by Registrar’s Order) made on 28 January 2021 (but…

Continue reading Taiaroa v Thomas

Sign in free to access the full text

Details
AGLC
Taiaroa v Thomas [2021] FedCFamC2G 28
Case
[2021] FedCFamC2G 28
Decision Date

CaseChat Overview and Summary

In Taiaroa v Thomas, the applicants sought to have the sequestration order made against the respondent set aside, following a decision of the Registrar. The court held that the application for review led to a hearing de novo of the creditor’s petition, and that the onus was upon the creditor to prosecute its petition. The court found that the evidence supported a finding that the respondent was insolvent, that he had no viable cross claim and/or had no capacity to prosecute that cross-claim because he was unable to satisfy the order security for costs made in the Supreme Court of Queensland. The court concluded that there were sufficient grounds to make a sequestration order against the respondent’s estate, and dismissed the respondent’s application for review. The court also ordered that the applicants’ and supporting creditor’s costs be taxed and paid from the sequestered estate of the respondent.

The court considered the provisions of the Bankruptcy Act 1966 (Cth) which provide that at the hearing of a creditor’s petition, the court shall require proof of the matters stated in the petition, service of the petition, and the fact that the debt on which the petitioning creditor relies is still owing. If the court is satisfied with the proof of those matters, it may make a sequestration order against the estate of the debtor. However, if the court is not satisfied with the proof of any of those matters, or if the debtor proves that they are able to pay their debts or that for other sufficient cause a sequestration order ought not to be made, the court may dismiss the petition. The court held that the applicants had satisfied the proof required by s 52(1) of the Bankruptcy Act, and that the respondent had not established any sufficient cause under s 52(2) of the Bankruptcy Act to not make a sequestration order.

Orders

Orders of the court

THE COURT ORDERS THAT:

1. The application for review filed by the Respondent on 15 February 2021 be dismissed.

2. The estate of Luke Andrew Thomas be sequestrated under the Bankruptcy Act 1996 (Cth).

3. The Applicants’ costs, and the Supporting Creditor’s costs, including reserved costs, be taxed and paid from the estate of the Respondent debtor in accordance with the Bankruptcy Act 1966.

Background

Background to the litigation

This review proceeding is conducted as a hearing de novo and the Court begins afresh and exercises for itself any discretion decided or exercised by the Registrar: see r20.03 of the Federal Circuit Court Rules 2001 (Cth); see also Conlan v Mladenis [2007] FCA 1129 at [4] – [5]. I also have regard to the principles set out by the Full Court in Bechara v Bates [2021] FCAFC 34 at [27]:27. Thus, relevant to the matter before us, the following is, and has been since the mid-1990s, clear about the nature of a de novo hearing by way of review of a sequestration order in bankruptcy made by a registrar:(a) The application for review leads to a hearing de novo of the creditor’s petition.(b) The hearing (or rehearing) of the creditor’s petition is not prosecuted by the debtor (applicant for review) but by the creditor in the proceeding in which the registrar’s order was made.(c) The application for review is a demand that the claim for relief (the sequestration order) be heard by a judge.(d) The onus is upon the creditor to prosecute its petition. The only onus of the debtor/bankrupt against whose estate a sequestration order has been made is to prove either solvency or any other sufficient cause under s 52(2) of the Bankruptcy Act 1966 (Cth).(e) An appreciation of the above considerations makes it evident that summary or default judgment terminating an application for review is highly likely to be misconceived and founded upon a misconception that the applicant for review has an onus to prosecute an application or to show error in the approach of the registrar.BACKGROUND This matter has a considerable history in the Federal Circuit Court of Australia (“the FCCA”), the Federal Court of Australia (“the FCA”) and the Supreme Court of Queensland (“the SCQ”). This Court has the benefit of the background in this matter as set out in: (1)Registrar Ryan’s decision in the FCCA made on 28 January 2021 of which there is a transcript; and(2)his Honour Judge Jarrett’s decision delivered on 22 December 2020 in other FCCA proceedings of this matter: see Thomas v Taiaroa & Anor [2020] FCCA 3524 (“Thomas v Taiaroa”). In this matter, the act of bankruptcy relied upon by the Applicants is the non-compliance by the Respondent with a bankruptcy notice served upon him on 21 November 2019 (“the bankruptcy notice”). The bankruptcy notice refers to a debt of $11,547.24 relating to a costs judgment obtained by the Applicants against the Respondent in the SCQ on 11 November 2019. By way of background, the dispute between the parties relates to La La Land Byron Bay Pty Ltd (“the company”), which operated a bar and nightclub in Byron Bay, New South Wales. The First Applicant was a shareholder and former director of the company. The Respondent was a creditor and shareholder in the company. He was also the licensee and manager of the bar and nightclub from December 2014 to September 2015, and was a former director of the company until he was removed from that position on 18 September 2015.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The evidence in this proceeding supports a finding that the Respondent is insolvent, that he has no viable cross claim and/or has no capacity to prosecute that cross-claim because he is unable to satisfy the order security for costs made in the SCQ. In those circumstances, the Respondent fails to establish that there are sufficient grounds to adjourn the hearing to allow him to prosecute that claim.CONCLUSION The court is not satisfied that it is appropriate to further adjourn the petition and I do not consider that there is other sufficient cause under s52(2)(b) of the Bankruptcy Act to not make a sequestration order. There is no evidence filed by the Respondent to suggest that he is solvent. I am not satisfied that a sequestration order should not be made under s52(2)(a) of the Bankruptcy Act. For these reasons, I will dismiss the Respondent’s application for review of the Registrar’s decision filed on 15 February 2021. An order will also be made for the Applicants’ and Supporting Creditor’s costs to be taxed and paid from the sequestered estate of the Respondent.

Ratio Decidendi

Legal Principle Established

In submissions filed on 14 April 2021, the Applicants submit at [36] that the Court “should not be satisfied that a sequestration [order] should not be made under s.52(1) of the [Bankruptcy] Act.” On that basis, the Applicants seek orders that the Registrar’s order be upheld, and that a sequestration order be made against the estate of the Respondent. Further, the Applicants seek that their costs of these proceedings, and the costs of the Supporting Creditor, be paid from the sequestered estate in accordance with the Bankruptcy Act.CONSIDERATIONGoing Behind the Judgment Subsection 52(1) and s52(2) of the Bankruptcy Act provide as follows:(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.…(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. In Stratton v Bowles (No.2) [2015] FCA 43 (“Stratton”), his Honour Beach J stated at [27] – [30] that:27. A petitioning creditor has a “prima facie right” to a sequestration order once proof of the matters required by s 52(1) has been satisfied (Deputy Commissioner of Taxation v Cumins (2008) 101 ALD 78 (Cumins) at [14] per Gilmour J; Cain v Whyte (1933) 48 CLR 639 (Cain v Whyte) at 646 and 648, the Court agreeing with Henchman J; Russell v Polites Investments Pty Ltd [2012] FCA 11 (Russell v Polites) at [23]-[24] per Flick J; Rozenbes v Kronhill (1956) 95 CLR 407 at 414 per Dixon CJ and Webb and Fullagar JJ). Nevertheless, there is a discretion to refuse such an order for inter alia “other sufficient cause” (s 52(2)(b)).28. In relation to the concept of “other sufficient cause” a number of points should be made.29. First, the circumstances which may constitute “other sufficient cause” are extremely variable, and it is inappropriate to catalogue or circumscribe them (Clyne v Deputy Commissioner of Taxation (1985) 5 FCR 1 at 5 per Fisher, Morling and Wilcox JJ; Cain v Whyte at 645).30. Second, even if “other sufficient cause” has been shown, that merely enlivens the court’s discretion to refuse to make a sequestration order. The power in s 52(2) is permissive, not mandatory. Even if a debtor can bring himself or herself within s 52(2)(b), that does not entitle him or her to have a sequestration order refused (Russell v Polites at [24] per Flick J). The Court has a discretion to go behind the judgment which forms the basis of the bankruptcy notice. In Stratton, Beach J stated at [32] that:32. Generally, a court has a discretion to go behind a judgment. This may be exercised where:(a) the judgment was obtained by default or compromise;(b) the judgment was procured by or tainted with fraud or collusion; or(c) the judgment was obtained following an adjudication on the merits where both parties appeared, but where there are substantial reasons for questioning whether there is in substance a debt.