The Owners Of Strata Plan No.7663; v Schwarcz
[2005] FMCA 537
•21 April 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| THE OWNERS OF STRATA PLAN No.7663 v SCHWARCZ | [2005] FMCA 537 |
| BANKRUPTCY – Application to set aside consent orders – where proceedings for a Sequestration Order were commenced in Tasmania instead of in New South Wales – where procedural orders were made to allow the applicant time to satisfy the court and the other party that he was solvent – where the affidavit and application appear to indicate that the applicant had not given authority to a solicitor to sign consent orders on his behalf – whether or not the applicant was misled in relation to the consent orders that they should be negated. COSTS – Where proceedings commenced in Tasmania although neither the applicant nor respondent have any association with that State – where no extra costs of trustees or solicitors should be allowed by virtue of the Tasmanian orders. |
| Bizuneh v The Minister [2000] FCA 126 Mintel International Group Limited v Mintel (Australia) Pty Limited and Another [2000] FCA 1410 Waitemata City Council v MacKenzie (1988) 2 NZLR 242 |
| Applicant: | THE OWNERS OF STRATA PLAN NO.7663 |
| Respondent: | ITSHAK SCHWARCZ |
| File Number: | LNG 65 of 2004 |
| Judgment of: | Raphael FM |
| Hearing date: | 21 April 2005 |
| Date of Last Submission: | 21 April 2005 |
| Delivered at: | Sydney |
| Delivered on: | 21 April 2005 |
REPRESENTATION
| Counsel for the Trustee: | Mr Pignone |
| Counsel for the Respondent: | Mr Radman |
ORDERS
The application is dismissed.
All claims that are relevant to the current proceedings are dismissed.
Mr Schwarcz as applicant to this application but respondent to the substantive proceedings to pay the creditor’s costs.
Mr Schwarcz as applicant to this application but respondent to the substantive proceedings to pay the trustee’s costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
LNG 65 of 2004
| THE OWNERS OF STRATA PLAN NO 7663 |
Applicant
And
| ITSHAK SCHWARCZ |
Respondent
REASONS FOR JUDGMENT
I have before me an application by the bankrupt to set aside consent orders signed on his behalf by a solicitor who indicated he was acting for him on 1 March 2005. As Healy J said in Mintel International Group Limited v Mintel (Australia) Pty Limited and Another [2000] FCA 1410 at [35]:
It was not disputed that a court may set aside an order made by consent and intended to carry out an agreement between the parties upon any grounds on which the agreement may be set aside: DCT v Chamberlain (1990) 26 FCR 221 at 230; 93 ALR 729 per Wilcox J quoting Huddersfield Banking Co Limited v Henry Lister & Sons Limited [1895] 2CH 273. One of the grounds on which an agreement can be set aside is unconscionable conduct.
In Bizuneh v The Minister [2000] FCA 126 the Full Bench, Burchett, Carr and R D Nicholson JJ cited with approval a decision of the Court of Appeal of New Zealand in Waitemata City Council v MacKenzie (1988) 2 NZLR 242 at 249 where the court indicated:
I am disposed to accept that the court in an action taken for that purpose does have an inherent jurisdiction to set aside a sealed consent order obtained without authority or as a result of a mistake if the interests of justice require it.
In short form the history of this matter is as follows. Mr Schwarcz became in dispute with the body corporate of the units which he occupies. He owed them approximately $4000. He did not pay it. He was sued. He did not pay the judgment. A Bankruptcy Notice was issued against him. He did not pay that. At this stage the obvious recalcitrance of Mr Schwarcz became clouded by the actions of those responsible for enforcing the judgment. Instead of commencing proceedings for a Sequestration Order against Mr Schwarcz in New South Wales as was right and proper, they commenced those proceedings in Tasmania. Criticism of this type of activity has been made by this court and the Federal Court in the past. It is reprehensible that a party who has no connection whatsoever with another state should be required to answer a bankruptcy petition in such a state when the applicant is also not resident. It may be legal, but it is not proper.
A Sequestration Order was made by Registrar Parrot of the Federal Magistrates Court in Tasmania and Mr Schwarcz sought a review of that decision. The application for review was made in this court. Mr Schwarcz came before the court and argued that he was solvent. Certain orders of a procedural nature were made and the application was adjourned till 1 March 2005. The purpose of the procedural orders was to allow Mr Schwarcz time to satisfy the court and the other side that he was solvent that therefore no Sequestration Order should be made against him in the discretion of the court. Mr Schwarcz claimed that he had not had an opportunity to attend the hearing in Tasmania, a not unexpected assertion.
When the matter was called on on 1 March 2005 Mr Schwarcz appeared to be represented by Mr Palmer. The matter was adjourned for the parties to have discussions. They did have those discussions and as a result a consent order was produced. The consent order had the effect of dismissing Mr Schwarcz's application for review therefore confirming the Sequestration Order that had been made against him in Tasmania by Registrar Parrot. Approximately six weeks later on
12 April 2005 Mr Schwarcz filed this application. He also filed an affidavit. The affidavit and the application appear to indicate Mr Schwarcz had not given authority to Mr Palmer to sign the consent orders on his behalf. There was no affidavit from Mr Palmer to this effect.
Today Mr Schwarcz appeared in person. We had the benefit of the assistance of Mr Pignone who is a solicitor for the trustee. Mr Pignone was present on 1 March and gave helpful evidence concerning what occurred. It would appear, because I accept Mr Pignone's evidence and because it was to some extent confirmed by Mr Schwarcz in his own evidence and under cross-examination from Mr Radman, that Mr Palmer was a properly instructed solicitor in relation to the proceedings. It also appears that the options open to Mr Schwarcz of contesting the application or of consenting to his own bankruptcy but applying later for an annulment on the basis that all creditors had been paid, or undertaking a scheme pursuant to the provisions of the Bankruptcy Act were all explained to him by a combination of Mr Palmer and Mr Pignone.
Mr Schwarcz is not a natural English speaker. However, I have now had experience of him appearing before me on several occasions and I have little doubt that the matters which were explained to him were capable of being understood by him. I am satisfied from the evidence of Mr Pignone that those matters were explained to him carefully and in a way which he could understand. Mr Schwarcz does not deny that he gave instructions to Mr Palmer to sign the consent orders. What he says is that he was misled into so doing.
Having heard the evidence Mr Schwarcz and of Mr Pignone I am not satisfied that he was misled. Mr Schwarcz is rightly, in my view, upset at the manner in which these bankruptcy proceedings have been conducted against him. But that is not a sufficient reason to set aside the Sequestration Order he consented to being entered. I do not believe that Mr Schwarcz has provided me with any evidence upon which I could make a finding that he was so misled in relation to the consent orders that they should be negated. For those reasons I must dismiss the application and I order that Mr Schwarcz as applicant to this application but respondent to the substantive proceedings pay the creditor's costs. A more difficult question is the payment of the costs of Mr Pignone who appears on behalf of the trustee. It is always helpful for the court when there is an appearance on behalf of the trustee in matters such as this and Mr Pignone told me that the proceedings had actually been served upon him, rather than upon Mr Radman. I believe in the circumstances that it is appropriate that his costs be paid as well.
It remains only to make this comment which I wish to have borne in mind when the trustee and his solicitors come to tax or assess their costs for acting in the estate. There would, to my mind, be no reason whatsoever why any extra costs should be incurred in the sequestration of Mr Schwarcz's estate by virtue of the trustee being in Tasmania. Mr Schwarcz should not be asked to expend any moneys to go to Tasmania to visit the trustee and the trustee should not be entitled to any extra payment for coming to Sydney in order to visit Mr Schwarcz. There were no grounds upon which this trustee should have been appointed in Tasmania and if he accepts the appointment he must do so on the basis that he is no different to a trustee in New South Wales. The same applies to the solicitors although I note that they are actually in New South Wales, but there are some solicitors who appear to have been appointed in Tasmania.
Mr Radman has kindly reminded me that Mr Schwarcz seeks orders other than the setting aside of the sequestration order in his application. I dismiss all those claims as they are not relevant to the current proceedings. If Mr Schwarcz believes he has an action against the strata management company for some reason or another he is entitled to bring that independently.
I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Raphael FM
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