The Owners - Strata Plan No 11927 v Doueihi

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FEDERAL CIRCUIT COURT OF AUSTRALIA

THE OWNERS - STRATA PLAN NO 11927 v DOUEIHI [2019] FCCA 3624
Catchwords:
BANKRUPTCY – Application for sequestration order – whether preconditions for making sequestration order satisfied – whether respondent able to pay his debts – whether there is any sufficient cause why sequestration order ought not be made – sequestration order made.

Legislation:

Bankruptcy Act 1966 (Cth), ss.43(1), 44(1), 47(1A), 52, 156A

Limitations Act 1969 (NSW), s.14
Strata Schemes Management Act 2015 (NSW), s.106
Strata Titles Management Act 1996 (NSW), s.75

Cases cited:

Burrell v Reavill Farm Pty Ltd & Ors [2014] FCCA 1449

Emerson v Wreckair Pty Ltd (1992) 33 FCR 581

Guss v Johnstone [2000] HCA 26

Liang v LV Property Investments Pty Ltd [2015] FCA 1057
Applicant: THE OWNERS - STRATA PLAN NO 11927
Respondent: ELIE DOUEIHI
File Number: LNG 25 of 2019
Judgment of: Judge Manousaridis
Hearing date: 20 September 2019
Date of Last Submission: 20 September 2019
Delivered at: Sydney
Delivered on: 19 December 2019

REPRESENTATION

Applicant in person Mr T Bors
Solicitors for the Applicant: CCA Legal Pty Ltd
Respondent in person

THE COURT ORDERS THAT:

  1. The estate of Elie Doueihi is sequestrated under the Bankruptcy Act 1966 (Cth).

  2. The applicant creditor’s costs (including reserved costs) be taxed and paid from the estate of Elie Doueihi in accordance with the Bankruptcy Act 1966 (Cth).

THE COURT NOTES THAT:

  1. The date of the act of bankruptcy is 21 March 2019.

  2. The consent to act as trustee signed by Brett Richard Geoffrey Harrison has been filed under s.156A of the Bankruptcy Act 1966 (Cth).

  3. A copy of this order is to be provided to the official receiver in Sydney within two business days.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

LNG 25 of 2019

THE OWNERS - STRATA PLAN NO 11927

Applicant

And

ELIE DOUEIHI

Respondent

REASONS FOR JUDGMENT

Introduction

  1. Before me is a creditor’s petition presented by The Owners – Strata Plan No. 11927 (Owners Corporation) seeking a sequestration order under s.52(1) of the Bankruptcy Act 1966 (Cth) (Act) in relation to the estate of the respondent, Mr Doueihi.

  2. Before I can make a sequestration order I must be satisfied that the matters specified in s.43(1), s.44(1), and s.52(1) of the Bankruptcy Act 1966 (Cth) (Act) are proved. These include the following:

    a)Mr Doueihi has committed an act of bankruptcy (as required by s.43(1) of the Act);

    b)Mr Doueihi owes the Owners Corporation, among other things, a debt that amounts to at least $5,000, and that debt is a liquidated sum due wholly or partly at law or in equity that is payable either immediately or at a certain future time (as required by s.44(1) of the Act);

    c)the matters stated in the creditor’s petition on which the Owners Corporation relies (as required by s.52(1)(a) of the Act);

    d)the creditor’s petition has been served on Mr Doueihi (as required by s.52(1)(b) of the Act); and

    e)the fact that the debt or debts on…

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Details
Case
[2019] FCCA 3624
Decision Date

CaseChat Overview and Summary

The Owners – Strata Plan No. 11927 (the Owners Corporation) presented a creditor's petition seeking a sequestration order against the estate of Mr Doueihi. The Owners Corporation relied on Mr Doueihi's failure to comply with a bankruptcy notice issued on 25 February 2019, which demanded payment of $37,500. This sum represented the outstanding balance of a judgment entered by the Owners Corporation in the Local Court of New South Wales on 21 February 2019, pursuant to consent orders made on 21 March 2018. These consent orders stipulated that Mr Doueihi was to pay $45,000 in monthly instalments of $3,750, with the Owners Corporation entitled to enter judgment for the unpaid balance upon default. The debt arose from unpaid strata levies for two lots registered in Mr Doueihi's name.

The court was required to determine whether the preconditions for making a sequestration order under the *Bankruptcy Act 1966* (Cth) were satisfied. This involved assessing whether Mr Doueihi had committed an act of bankruptcy, whether he owed a liquidated debt of at least $5,000, and whether the creditor's petition and the underlying debt were properly established and served. Additionally, the court had to consider Mr Doueihi's grounds for opposing the sequestration order, namely the existence of an instalment order made by the Local Court in relation to the judgment debt, and whether the Owners Corporation's alleged failure to repair common property constituted "some other sufficient cause" for the sequestration order not to be made.

The court found that the Owners Corporation had established the necessary preconditions for a sequestration order. The act of bankruptcy was Mr Doueihi's failure to comply with the bankruptcy notice, which was based on a valid judgment for unpaid strata levies. The court noted that Mr Doueihi's reliance on an instalment order made after the judgment was entered did not negate the existence of the debt or the act of bankruptcy. Furthermore, the court determined that Mr Doueihi's claim regarding the Owners Corporation's failure to repair common property did not constitute "sufficient cause" to dismiss the petition, as it did not demonstrate an inability to pay debts or a sufficient reason for the court to refrain from making the order.

Consequently, the court was satisfied that the Owners Corporation had proven the matters required by sections 43(1), 44(1), and 52(1) of the *Bankruptcy Act 1966* (Cth), and that there was no sufficient cause for refusing to make the sequestration order. Accordingly, a sequestration order was made against the estate of Mr Doueihi.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The act of bankruptcy on which the Owners Corporation relies is Mr Doueihi’s failure to comply with the requirements of a bankruptcy notice issued against him on 25 February 2019. The bankruptcy notice demands payment of $37,500. That represents a judgment for $37,500 the Owners Corporation entered in the Local Court of New South Wales on 21 February 2019 (Judgment) pursuant to consent orders made by that Court on 21 March 2018. Those orders required Mr Doueihi to pay $45,000 to the Owners Corporation by 12 equal monthly instalments of $3,750, in default of which the Owners Corporation would be entitled to enter judgment against Mr Doueihi for the unpaid balance. The $45,000 represented unpaid strata levies the Owners Corporation raised against Mr Doueihi in relation to two lots of which Mr Doueihi is the registered proprietor in the strata plan of which the Owners Corporation is the owners corporation. Mr Doueihi made only two of the twelve monthly payments the consent orders required that he pay, and, after he defaulted in making the further payments he was required to make, the Owners Corporation entered judgment for the balance of the $45,000 Mr Doueihi did not pay. Mr Doueihi, who is not legally represented, relies on two grounds for opposing the making of a sequestration order. The first is that on 2 April 2019 the Local Court made an instalment order in relation to the Judgment, and that order is still in force. Second, the Owners Corporation failed to put into proper repair parts of the common property, as a result of which Mr Doueihi has suffered loss that exceeds the amounts the Owners Corporation levied against him. Thus, even if the Owners Corporation establishes the preconditions for the making of a sequestration order, Mr Doueihi claims the Owners Corporation’s failure to put into proper repair the common property constitutes “some other sufficient cause” for the Court not making a sequestration order. In these reasons for judgment, therefore, I consider whether the Owners Corporation has established the preconditions for the making of a sequestration order and, if so, whether any of the grounds on which Mr Doueihi relies afford a sufficient cause for my not making a sequestration order. Before I consider these matters, it would be useful to set out the circumstances in which the Owners Corporation entered the Judgment. The Owners Corporation is the owners corporation in relation to strata scheme SP11927 that is located at 124 Margaret Street, Orange. Mr Doueihi is the registered proprietor of lots 6 and 15. In 2016 the Owners Corporation commenced two proceedings against Mr Doueihi in the Local Court of New South Wales.[3] There is in evidence a copy of the amended statement of claim filed in one of the proceedings (Proceeding No. 2016/00329732) (first proceeding).[4] The Owners Corporation claimed that on various dates in the period commencing on 22 January 1999 and ending on 12 February 2016 it resolved to raise levies in accordance with s.75 of the Strata Titles Management Act 1996 (NSW), but Mr Doueihi failed to pay his contribution of the levies which amounted to $32,210.41. The Owners Corporation claimed it was entitled to recover that amount as a debt together with interest of $24,548.69.[3] Affidavit of J E Frankcom, 22.05.2019, [3][4] Affidavit of J E Frankcom, 22.05.2019, [5]; annexure “JF2”

Ratio Decidendi

Legal Principle Established

Before me is a creditor’s petition presented by The Owners – Strata Plan No. 11927 (Owners Corporation) seeking a sequestration order under s.52(1) of the Bankruptcy Act 1966 (Cth) (Act) in relation to the estate of the respondent, Mr Doueihi. Before I can make a sequestration order I must be satisfied that the matters specified in s.43(1), s.44(1), and s.52(1) of the Bankruptcy Act 1966 (Cth) (Act) are proved. These include the following:a)Mr Doueihi has committed an act of bankruptcy (as required by s.43(1) of the Act);b)Mr Doueihi owes the Owners Corporation, among other things, a debt that amounts to at least $5,000, and that debt is a liquidated sum due wholly or partly at law or in equity that is payable either immediately or at a certain future time (as required by s.44(1) of the Act); c)the matters stated in the creditor’s petition on which the Owners Corporation relies (as required by s.52(1)(a) of the Act);d)the creditor’s petition has been served on Mr Doueihi (as required by s.52(1)(b) of the Act); ande)the fact that the debt or debts on which the Owners Corporation relies is or are still owing (as required by s.52(1)(c) of the Act). I must also be satisfied that the relevant provisions of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules) have been complied with, subject to a discretion to dispense with compliance of those rules.[1] [1] See Burrell v Reavill Farm Pty Ltd & Ors [2014] FCCA 1449 at [48] If I am satisfied with the proof of the matters specified in s.43(1), s.44(1), and s.52(1) of the Act, and that the requirements of the Bankruptcy Rules have been met (or their compliance is otherwise dispensed with), I may make a sequestration order. If I am not so satisfied I must dismiss the petition, or if, under s.52(2) of the Act, I am “satisfied by the debtor (a) that he or she is able to pay his or her debts; (b) that for some other sufficient cause a sequestration order ought not be made”, I may dismiss the petition.[2][2] Act, s.52(2) The act of bankruptcy on which the Owners Corporation relies is Mr Doueihi’s failure to comply with the requirements of a bankruptcy notice issued against him on 25 February 2019. The bankruptcy notice demands payment of $37,500. That represents a judgment for $37,500 the Owners Corporation entered in the Local Court of New South Wales on 21 February 2019 (Judgment) pursuant to consent orders made by that Court on 21 March 2018. Those orders required Mr Doueihi to pay $45,000 to the Owners Corporation by 12 equal monthly instalments of $3,750, in default of which the Owners Corporation would be entitled to enter judgment against Mr Doueihi for the unpaid balance. The $45,000 represented unpaid strata levies the Owners Corporation raised against Mr Doueihi in relation to two lots of which Mr Doueihi is the registered proprietor in the strata plan of which the Owners Corporation is the owners corporation. Mr Doueihi made only two of the twelve monthly payments the consent orders required that he pay, and, after he defaulted in making the further payments he was required to make, the Owners Corporation entered judgment for the balance of the $45,000 Mr Doueihi did not pay.