The Owners - Strata Plan No 11927 v Doueihi

[2019] FCCA 3624

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 which the Owners Corporation relies is or are still owing (as required by s.52(1)(c) of the Act).

3. 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]

4. 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)

5. 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.

6. 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.

7. 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.

8. 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.

Background

1. 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.

2. 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”

3. In his defence,[5] Mr Doueihi admitted the levying of contributions, that $32,210.41 represented the sum of the contributions the Owners Corporation levied against him, and that he had not paid those contributions. Mr Doueihi, however, raised two affirmative defences. One was that part of the Owners Corporation’s claims related to the contributions it had levied more than six years before it commenced the first proceeding, and s.14 of the Limitations Act 1969 (NSW) (Limitations Act) barred the Owners Corporation from recovering those contributions. The second defence was an asserted set off based on the matters Mr Doueihi alleged in his cross-claim. Mr Doueihi there alleged that on 1 May 1999 water penetration from a burst water main caused damage to lot 15, but the Owners Corporation, in breach of its duty, failed to rectify the damage. In its defence to the cross-claim, the Owners Corporation admitted lot 15 suffered water damage, but otherwise denied the allegations made in the cross-claim. In any event, the Owners Corporation alleged the claims were barred by s.14 of the Limitations Act.

   [5] Affidavit of J E Frankcom, 22.05.2019, [5]; annexure “JF2”

4. The pleadings in the second proceeding (Proceeding No. 2016/00329741) are not in evidence. There is in evidence, however, a document headed “Consent Orders” made on 21 March 2018, which relevantly provide as follows (errors in original):

   1.That the defendant pay the plaintiff the settlement sum of $45,000.00 (“Settlement Sum”) inclusive of all strata fees, between 1 January 2011 to 1 October 2016 inclusive of interest and costs calculated up to and including 19 March 2018 (as per schedule A + schedule B attached:

   2.The Settlement Sum to be paid by twelve (12) equal monthly instalments of $3,750.00 payable as follows:

   Month   1:         Amount: $3,750         Date: 31 March 2018

   2Amount: $3,750         Date: 30 April 2018

   3 Amount: $3,750         Date: 31 May 2018

   4Amount: $3,750         Date: 30 June 2018

   5Amount: $3,750         Date: 31 July 2018

   6Amount: $3,750         Date: 31 August 2018

   7Amount: $3,750         Date: 30 September 2018

   8Amount: $3,750         Date: 31 October 2018

   9Amount: $3,750         Date: 30 November 2018

   10Amount: $3,750         Date: 31 December 2018

   11Amount: $3,750         Date: 31 January 2019

   12Amount: $3,750         Date: 28 February 2019

   3.That the defendant pay all strata arrears in relation to Unit 6 and Unit 15 from 1 November 2016 to date, with the intent he is completely up to date by 18 April 2018.

   4.That pursuant to resolutions 7 & 8, as noted in the minutes of the minutes of meeting of the AGM dated 30 January 2018, the plaintiff undertakes to carry out the relevant rectification works to unit 6 and unit 15, so as to eliminate any water penetration to the internal lot property and, so as to allow the windows to be fully functional by 20 May 2019.

   5.Defendant undertakes to pay all strata levies, as and when they fall due.

   6.In the event that the defendant fails in his obligation to pay the settlement sum, or the instalments in clause 2, the plaintiff is entitled to seek judgment on the settlement sum less any payments made by the filing of an affidavit setting the relevant breaches.

   . . . .

5. The minutes of meeting referred to in paragraph 4 of the consent orders are in evidence.[6] Paragraph 7 records a resolution that “the installation of a height safety system be completed as an order of priority”, after which it was agreed that “a plumber be engaged to provide a quotation for all required gutter and roof repairs for the consideration of the Owners Corporation to be completed as soon as possible”. Paragraph 8 of the minutes of meeting recorded as follows:

   It was resolved that window repairs/replacement be carried out to the three (3) vertical windows (loungeroom) [sic] effecting Units 2, 6 & 10 as a priority as soon as funds become available”.

   [6] Exhibit A

6. There is some evidence relating to the background to the making of these resolutions, and that consists of an email exchange between Mr Doueihi and the strata managers of the strata scheme.[7] The first email is one the strata manager sent to Mr Doueihi on 19 September 2016. The strata manager referred to an on-site meeting with Mr Doueihi, and confirmed that quotations had been requested and that, as soon as they are received, an extraordinary general meeting would be called “for consideration and decision of this work”. Mr Doueihi responded with an email sent on the same day directing attention to the “below detail of Mr George Farah the builder that met with us on site, he is available to commence work immediately”.

   [7] Affidavit of E Doueihi, 20.05.2019, [22]; annexure “F”

7. There is also in evidence a quote dated 4 October 2016 issued by “George Georges trading as Direct Building Services Pty Ltd”, and addressed to the strata manager.[8] The quote is for $15,600 plus GST, and relates to the removal and replacement of three vertical block windows. The quote was issued on the assumption that the removal and replacement of the windows would not affect the integrity of the fixed sheeting panelled walls. It noted that “once the windows are removed, we will be able to assess the walls and determine if any more work is required”. The quote also noted that “we will also determine if an additional wall is required to be built creating a cavity in this section”. In his affidavit Mr Doueihi refers to the quote and says that the quote relates to 3 vertical block windows, but his unit has four such windows.[9]

   [8] Affidavit of E Doueihi, 20.05.2019, [22]; annexure “F”

   [9] Affidavit of E Doueihi, 20.05.2019, [22]

8. As I have already noted, Mr Doueihi paid only two of the twelve instalments he bound himself to pay by agreeing to the consent orders. In his affidavit Mr Doueihi said that he had consented to the making of the orders “on the basis that Strata was given sufficient time to complete works and that they would comply with the order”.[10]

   [10] Affidavit of E Doueihi, 20.05.2019, [21]

9. According to Mr Doueihi, he was served with the bankruptcy notice on 2 March 2019.[11] Mr Doueihi also says that on 4 March 2019 he attempted to call Ms Small, the strata manager, because he wanted to arrange a suitable payment plan. He says his phone calls were not returned.[12]

   [11] Affidavit of E Doueihi, 20.05.2019, [4]

   [12] Affidavit of E Doueihi, 20.05.2019, [5]

10. On 20 March 2019 Mr Doueihi sent the following email to Ms Small (errors in original):[13]

    I have received a court order in regards to the strata, can I please arrange a new payment arrange as the one that was entered I could not uphold as these units are in n condition to be rented out and I have no income coming in from them. I have sat down and worked that out that the most I can pay is between $800-$1000 per month and if by any chance I can pay any extra I will. This has honestly put a major in my financial situation and I am currently in financial difficulty from this as it has cost me so much. I would appreciate if we could come up with an arrange as soon as possible. Look forward to hearing from you. Could you please respond in writing in this email as I am not always available on my phone

    [13] Affidavit of E Doueihi, 20.05.2019, [5]; annexure “A”

11. After Mr Doueihi sent a follow up email on 21 March 2019 Ms Small responded by email sent on that day stating that “we have referred your email to CCA” (Collection Corporation of Australia).[14] Mr Doueihi stated that he attempted to call a person named John of CCA.[15]

    [14] Affidavit of E Doueihi, 20.05.2019, [5]; annexure “A”

    [15] Affidavit of E Doueihi, 20.05.2019, [6]

12. On 21 March 2019 Mr Doueihi filed with the Local Court a notice of motion for an order to pay the Judgment by instalments, and he served that document on CCA.[16] On 25 March 2019 the Local Court rejected the notice of motion because Mr Doueihi did not complete it correctly.  Mr Doueihi filed a further notice of motion on 2 April 2019. In that document he stated he had a weekly income of $1,000, and assets worth $190,100, $180,000 of which he claimed was the value of the two lots he owned in strata scheme SP11927.[17] Mr Doueihi also recorded liabilities totalling $46,000, which included $35,000 owing to the Owners Corporation. On 4 April 2019 the Local Court made an instalment order requiring Mr Doueihi to pay the Judgment in monthly instalments of $1,800 commencing on 4 April 2019.

    [16] Affidavit of E Doueihi, 20.05.2019, [7-8]; annexure “B”

    [17] Affidavit of E Doueihi, 20.05.2019, [11]; annexure “C”

13. On 5 April 2019 the Owners Corporation filed a notice of motion objecting to the instalment orders. On 18 April 2019 the Local Court dismissed the objection.[18]

    [18] Affidavit of E Doueihi, 20.05.2019, [13], [15]; annexure “D”

Proof of matters specified in s.52(1) of the Act

1. Section 52(1) of the Act provides as follows:

   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.

Proof of matters stated in the petition

1. The matters that must be stated in a petition are prescribed by s.47(1A) of the Act, which provides that if “the rules of court prescribe a form for the purposes of this subsection, the petition must be in the form prescribed”. Rule 4.02 of Bankruptcy Rules prescribes a form for the purposes of s.47(1A) of the Act. The form requires the creditor, among other things, to identify the act of bankruptcy on which the creditor relies, and the debt or debts the creditor claims the debtor owes it.

2. In the creditor’s petition, the Owners Corporation claims Mr Doueihi committed an act of bankruptcy by failing to comply with the requirements of the bankruptcy notice on or before 21 March 2019. The asserted act of bankruptcy is based on Mr Doueihi’s having been served with the bankruptcy notice on 28 February 2019. Mr Doueihi accepts he was served with the bankruptcy notice, and that he has failed to comply with its requirements. He deposes, however, that the bankruptcy notice was served on him on 2 March 2019.[19] Mr Doueihi also relies on an affidavit made by his brother who deposes to the same effect.[20] The Owners Corporation relies on an affidavit of service made by Ms Radoski, a process server, who deposes she served Mr Doueihi on 28 February 2019. Nothing turns on which evidence I accept. I am inclined, however, to prefer the evidence of Ms Radoski, only because she is a professional process server and, for that reason, is likely to have a system in place for the contemporaneous or near contemporaneous recording of the date and time on which, and the place at which, she serves documents.

   [19] Affidavit of E Doueihi, 20.05.2019, [4]

   [20] Affidavit of G Doueihi, 20.05.2019

3. I find, therefore, that Mr Doueihi was served with the bankruptcy notice on 28 February 2019. Given there is no dispute that Mr Doueihi has not complied with the requirements of the bankruptcy notice, I also find that he committed an act of bankruptcy by 21 March 2019. That Mr Doueihi applied after 21 March 2019 for an instalment order to pay the Judgment, and he succeeded in obtaining such order on 2 April 2019, does not alter the conclusion that, by failing to comply with the requirements of the bankruptcy notice within 21 days of his having been served with it, Mr Doueihi committed an act of bankruptcy. It has been held that an act of bankruptcy based on a failure to comply with the requirements of a bankruptcy notice remains in effect, even if the bankruptcy notice was based on a debt resulting from a judgment that was later set aside.[21] The same principle must apply where an act of bankruptcy consists of the failure to comply with the requirements of a bankruptcy notice based on a debt resulting from a judgment that, after the act of bankruptcy is committed, becomes the subject of an order that it be paid by instalments.

   [21] Guss v Johnstone [2000] HCA 26, at [58]

Service of creditor’s petition

1. As required by r.4.05 of the Bankruptcy Rules, the creditor’s petition was served on Mr Doueihi on 16 April 2019, being more than five days before the date fixed for the hearing of the creditor’s petition, together with the affidavit required by r.4.04(1)(a) of the Rules, and the affidavit of service of the bankruptcy notice.[22]

   [22] Affidavit of M Radoski, 18.04.2019

Debts on which the Owners Corporation relies are still owing

1. In the creditor’s petition the Owners Corporation relies on two debts or classes of debts. The first is the debt of $37,500 resulting from the Judgment. The second is what the creditor’s petition describes as “$12,699.80 for levies which became due and payable to the applicant creditor after the Statement of Claims (Plaint Number 2016/00329732 and Plaint Number 2016/00329741 were issued on the 4th November 2016 and before the act of bankruptcy. Levies are claimed pursuant to Section 83 of the Strata Schemes Management Act 2015”.  Section 83 of the Strata Schemes Management Act 2015 (NSW) (SSM Act) provides:

   (1) An owners corporation levies a contribution required to be paid to the administrative fund or capital works fund by an owner of a lot by giving the owner written notice of the contribution payable.

   (2) Contributions levied by an owners corporation must be levied in respect of each lot and are payable (subject to this section and section 82) by the owners in shares proportional to the unit entitlements of their respective lots.

   (3) Any contribution levied by an owners corporation becomes due and payable to the owners corporation on the date set out in the notice of the contribution. The date must be at least 30 days after the notice is given.

   (4) Regular periodic contributions to the administrative fund and capital works fund of an owners corporation are taken to have been duly levied on an owner of a lot even though notice levying the contributions was not given to the owner.

2. The creditor’s petition allows a credit of $6,360, being the amount Mr Doueihi paid on 18 April 2018.

3. The debts stated in the creditor’s petition are verified by an affidavit made by Ms Renae Barnett, who describes herself as a licensed commercial agent “of” CCA, and deposes to having access to information contained in a database maintained by the Owners Corporation which records the financial position of each lot of SP11927, including all levies, interest, recovery costs, and payments. Further, at the hearing on 20 September 2019, I read an affidavit of debt made by Mr Ecob, who also describes himself as commercial agent “of” CCA. He deposes that Mr Doueihi had paid $10,789 in reduction of the debts identified in the creditor’s petition, and that there remains unpaid a debt of $33,292.80.[23]

   [23] Affidavit of debt, S Ecob, 17.09.2019

4. That Mr Doueihi obtained an instalment order in relation to the debt arising under the Judgment does not prevent the Owners Corporation from proving that the debt or debts on which it relies in the creditor’s petition “is or are still owing”. First, although the debt arising under the Judgment is now liable to be paid by instalments and, for that reason, is not in its entirety immediately payable, s.44(1)(b)(ii) of the Act applies to a debt that “is payable either immediately or at a certain future time”. It has been held that a debt that was immediately payable but which has been converted to one payable in the future by instalments is a debt “payable . . . at a certain future time”.[24] Second, the Owners Corporation relies in the creditor’s petition not only on the debt arising from the Judgment, but also the debt arising from the levying of contributions in relation to the two lots Mr Doueihi owns. There is no requirement that the debt on which a creditor relies to support his or her creditor’s petition be a judgment or even the same debt as the one on which the creditor relies to establish the act of bankruptcy on which he or she relies. There is no issue that the Owners Corporation has levied the contributions it identifies in the creditor’s petition, and that these are debts that arose before Mr Doueihi committed the act of bankruptcy on which the Owners Corporation relies.[25]

   [24] Re Agrillo; Ex parte Bankrupt (1977) 29 FLR 484 (Riley J)

   [25] Emerson v Wreckair Pty Ltd (1992) 33 FCR 581, at page 588 (Morling, Neaves, Spender JJ): “There is, however, no requirement for the issue of a bankruptcy notice that the creditor have a judgment for any minimum amount. Nor is there a requirement that a creditor who petitions for a sequestration order based upon an act of bankruptcy of the kind for which s 4O(1)(g) of the Bankruptcy Act provides rely, wholly or at all, upon the debt upon which the bankruptcy notice was founded”.

Other matters

1. The Owners Corporation filed at the time it filed the creditor’s petition an affidavit required by r.4.04(1)(a) of the Bankruptcy Rules,[26] and, as required by r.4.04(1)(b), affidavits of service of the bankruptcy notice.[27] In addition, the Owners Corporation filed a “Trustee Consent to Act Declaration” signed by Mr Brett Richard Geoffrey Harrison and an affidavit of search, as required by r.4.06(3) of the Bankruptcy Rules.[28]

   [26] Affidavit R Barnett, 25.03.2019

   [27] Affidavit M Radoski, 01.03.2019

   [28] Affidavit of Search S Ecob, 17.09.2019

Conclusion

1. I am satisfied the Owners Corporations has proved the matters specified in s.52(1) of the Act, and that it has complied with the relevant provisions of the Bankruptcy Rules.

Reason for not making a sequestration order?

1. As I have already noted, Mr Doueihi relies on what he claims has been the failure by the Owners Corporation to repair certain defects in the common property. He claims that he has suffered losses of around $500,000.

2. It is open to a debtor to claim at the hearing of a creditor’s petition that he or she has a cross-claim against the creditor in an amount that exceeds the amount of the debt on which the creditor relies. Such a claim, when made, may be relevant in two ways. The first is where the bankruptcy court is not in a position to determine whether the asserted cross-claim is likely to succeed, but nevertheless is satisfied that the claim is of sufficient substance that the validity of the claim ought to be determined by the ordinary process by which civil claims are determined. Where the bankruptcy court is so satisfied it has a discretion to adjourn the creditor’s petition until such time as the cross-claim is determined in the ordinary course. Second, a bankruptcy court may not only be satisfied that the cross-claim is of substance, but also that the debtor is likely to have a cross-claim that exceeds the judgment on which the creditor’s petition is based. Here, although the bankruptcy court retains a discretion to adjourn the hearing of the creditor’s petition it has the additional discretion to treat the existence of the cross-claim as “some other sufficient cause” and, for that reason, dismiss the creditor’s petition.[29]

   [29] Liang v LV Property Investments Pty Ltd [2015] FCA 1057, at [59], [60]

3. There is no dispute that three vertical windows require replacement. It is not clear, however, whether the condition of the windows constitutes a defect or whether, instead, it is the manifestation of disrepair arising out of a failure by the Owners Corporation, contrary to s.106(1) of the SSM Act, properly to maintain and keep in good repair the common property. Whichever way the poor condition of the windows is characterised, however, the evidence before me establishes that Mr Doueihi has been aware of these defects since 1999. That means that, even if Mr Doueihi had a right of action for damages against the Owners Corporation, either at common law or under s.106(5) of the SSM Act, such rights of action have become barred, either by the operation of s.14 of the Limitations Act in relation to any common law claim he might have had, or by s.106(6) of the SSM Act, which provides that an owner may not bring an action under s.106 for breach of statutory duty more than 2 years after the owner becomes aware of the loss. I am not satisfied, therefore, that Mr Doueihi has any substantial claim for damages against the Owners Corporation for loss he says he suffered because of the defects in or disrepair of the common property. For that reason, his asserted cross-claim does not warrant the hearing of the creditor’s petition being adjourned, and otherwise does not constitute “some other sufficient cause” why a sequestration order ought not be made.

4. Next, I consider the relevance, if any, of the instalment order. The instalment order is potentially relevant to whether Mr Doueihi is able to pay his debts. Mr Doueihi, however, does not submit he is able to pay his debts as and when they fall due. That is consistent with the statement of his assets and liabilities, and his income and expenses, he made in support of his application that he pay the Judgment by instalments. The only income he disclosed is a weekly income of $1,000, and basic living expenses of $475 per week. Under the instalment order Mr Doueihi is required to pay $1,800 every month, which equates to around $450 per week. That leaves no income with which to pay the additional contributions the Owners Corporation has levied, and will continue to levy in relation to the two lots Mr Doueihi owns. Further, Mr Doueihi disclosed owing $8,000 in council rates. It is the case that the value of the assets Mr Doueihi disclosed in his statement is said to exceed his liabilities by over $150,000; but there is no evidence that Mr Doueihi intends to sell either of his lots to put himself in the position to pay his debts as they fall due. I am not satisfied, therefore, that Mr Doueihi is able to pay his debts as and when they fall due.

5. Finally, at the hearing before me Mr Doueihi said that he acquired the lots as an investment, that the only way he could have paid and can now pay the contributions levied against him is if rent them out, but he cannot rent out the lots because of what he claims is the Owners Corporation’s negligence and breach of statutory duty. I have already concluded I am not satisfied Mr Doueihi has any substantial cross-claim against the Owners Corporation.

6. There is another matter to note, although this does not bear on the issues that are relevant to determining whether I should make a sequestration order. Mr Doueihi accepts that, apart from the instalments he has paid in relation to the Judgment, he has not paid contributions that have been levied against him since 1999. He does not claim that the Owners Corporation have access to insurance to cover the cost of rectifying the disrepair of which Mr Doueihi has been complaining. In those circumstances, the Owners Corporation must rely on the owners, including Mr Doueihi, to provide the money with which to carry out rectification work. Mr Doueihi, however, has refused to pay the contributions levied against him; and this may well have contributed to the Owners Corporations not being in a position to carry out any necessary rectification work.

Conclusion and disposition

1. I propose to make an order sequestrating the estate of Mr Doueihi, and note that a consent to act as trustee signed by Mr Brett Richard Geoffrey Harrison has been filed under s.156A of the Act. I also propose to order that the costs of the Owners Corporation (including reserved costs) be taxed and paid from the estate of Mr Doueihi in accordance with the Act.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis

Associate: 

Date: 19 December 2019