The Owners - Strata Plan No 21312 v Beck
[2014] FCCA 2897
•19 December 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| THE OWNERS - STRATA PLAN NO 21312 v BECK | [2014] FCCA 2897 |
| Catchwords: BANKRUPTCY – Creditor's petition – opposition on the basis of lack of authority to commence proceedings and other issues – sequestration order made. |
| Legislation: Bankruptcy Act 1966 (Cth), s.52 Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) |
| ANZ Banking Group Limited v Foyster [2000] FCA 400 Corney v Brien (1951) 84 CLR 343 Klinger v Nicholl [2005] FCAFC 153 SZRUR v Minister for Immigration and Border Protection [2013] FCAFC 146 (29 November 2013) Wren v Mahoney (1972) 126 CLR 212 |
| Applicant: | THE OWNERS - STRATA PLAN NO 21312 |
| Respondent: | MARIANNE ROSE BECK |
| File Number: | SYG 959 of 2014 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 18 September 2014 |
| Date of Last Submission: | 18 September 2014 |
| Delivered at: | Wollongong |
| Delivered on: | 19 December 2014 |
REPRESENTATION
| Solicitors for the Applicant: | Mr T Koski of Gilbert M Johnston & Co |
| The Respondent appeared in person |
ORDERS
A sequestration order is made against the estate of MARIANNE ROSE BECK.
The Court notes that the date of the act of bankruptcy is 26 November 2013.
The Court notes the obligations on the Applicant Creditor to notify, enter and serve these Orders in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth).
The Applicant’s costs be taxed and paid from the estate of the Respondent in accordance with the Bankruptcy Act 1966.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 959 of 2014
| THE OWNERS - STRATA PLAN NO 21312 |
Applicant
And
| MARIANNE ROSE BECK |
Respondent
REASONS FOR JUDGMENT
Introduction
The Applicant in this case is the Owners of Strata Plan Number 21312. The Applicant filed a Creditor’s Petition on 8 April 2014 and asks the Court to make a sequestration order against the estate of the Respondent. The Respondent, who is an owner and occupier of a lot in Strata Plan 21312, opposes the Creditor’s Petition and asks that it be dismissed.
Background
Matters of background are largely uncontentious. On 6 August 2012, the Applicant obtained judgment against the Respondent in the Local Court in the amount of $10,392.71, the first Local Court judgment. On 7 September 2012, the Respondent appealed the said judgment by way of a summons to the District Court. On 25 February 2013, Her Honour Judge Gibson in the District Court made a number of Orders of a procedural nature in relation to the Respondent’s summons.
On 10 May 2013, the Applicant obtained judgment against the Respondent and her mother, Mary Winifred Baldwin (now deceased but at the time a co-owner with the Respondent of the lot in the Strata Plan) in the amount of $4287.09, the second Local Court judgment.
On 28 May 2013, His Honour Judge Knox in the District Court struck out the summons in the District Court claim arising out of the first Local Court judgment. A few months later, on 21 August 2013, Her Honour Judge Gibson of the District Court ordered the Respondent to pay the Applicant’s costs of the District Court proceedings, in the sum of $13,838.
On 1 November 2013, a Bankruptcy Notice issued on the basis of the two Local Court judgments, totalling $14,679.80. The Bankruptcy Notice was served on the Respondent on 5 November 2013. On 15 November 2013, the Respondent made a payment of $1,000 to the Applicant. Also on that date, the Respondent filed a Notice of Motion to pay by instalments the first Local Court judgment and, on 18 November 2013, a Notice of Motion to pay by instalments the second Local Court judgment.
On 26 November 2013, the Applicant contends that the Respondent committed an act of bankruptcy by not complying by the Bankruptcy Notice. However, on 6 December 2013, the Respondent made two payments to the Applicant totalling $13,679.80.
On 13 May 2014, the Applicant filed the present Creditor’s Petition. Part 1 of the Petition recites many of the uncontested facts recited above, details the costs incurred after judgment, the interest that accrued on the judgments, and in addition further strata levies that became due and payable subsequent to the judgments in question. Significantly, the Respondent is given credit for the payment of $14,679.80 paid towards the amount outstanding. The Applicant contends that the Respondent is indebted to it in the sum of $18,842.48. It is apparent that most, if not all, of the sum in question relates to the costs order made in the District Court, together with interest, together with further unpaid levies. In the Creditor’s Petition, the Applicant contends that the Respondent committed an act of bankruptcy by failing to comply with the requirements of the Bankruptcy Notice duly served on her, or to satisfy the Court that the Respondent had a counter-claim, set-off or cross demand equal to or exceeding the sum specified in the Bankruptcy Notice, being a counter-claim, set-off or cross demand that she could not have set up in the action in which the judgment referred to in the Bankruptcy Notice was obtained.
On 31 July 2014 the Respondent, who was at all times representing herself in these proceedings, filed a Notice Stating Grounds of Opposition to the petition. The grounds of opposition appear to contain 17 different grounds. The grounds are in handwriting and too long to reproduce in these reasons for judgment. The Court will do the best it can to summarise the grounds of opposition.
The Respondent raises a number of concerns, including the “falsity” of the Application to this Court. She alleges that the debt was paid, that there were irregularities with the Local Court judgment, that there were numerous issues with the appeal to the District Court, that false evidence was relied on, that the Owners Corporation did not authorise the proceedings against her, that there was an agreement to pay the debt that was not honoured, that the Owners Corporation was in any event insured for the legal costs that they incurred and which are now sought to be recovered against her, that there was fraud, theft, bribery by or on behalf of various parties, likewise misappropriation, that the Owners Corporation was in breach of the statutory duties owed to her and also that strata levies were paid for many years on the basis of services that were not in fact provided.
The Evidence Relied On
The material relied on in the Applicant Creditor’s case is as follows:
·Creditor’s Petition, filed 8 April 2014;
·Affidavit Verifying Petition, filed 8 April 2014;
·Affidavit Verifying Paragraph 4 of Petition, filed 8 April 2014
·Affidavit of Personal Service, filed 8 April 2014
·Affidavit of Service of Creditor’s Petition, filed 2 May 2014;
·Affidavit of Thomas Daniel Koski, affirmed 24 June 2014
·Affidavit of Tracey Payne, affirmed 24 June 2014;
·Affidavit of Stephan Ecob, affirmed 24 June 2014
·Affidavit of Thomas Daniel Koski, affirmed 11 September 2014;
·Affidavit of Tracey Payne, affirmed 11 September 2014;
·Affidavit of Thomas Daniel Koski, affirmed 12 September 2014;
·Affidavit of Search, filed 17 September 2014
·Affidavit of Debt, filed 17 September 2014; and
·Applicant’s Chronology and Submissions, dated 16 September 2014.
The material relied on by the Respondent was as follows:
·Notice stating grounds of opposition to application, interim application or petition, filed 31 July 2014;
·Affidavit of Marianne R Beck, sworn/affirmed 24 April 2014;
·Affidavit of Marianne Beck, sworn 4 July 2014; and
·Affidavit of Marianne R Beck, sworn/affirmed 1 September 2014.
In addition, a large volume of documents were tendered in evidence and, where relevant, these documents will be specifically referred to in these reasons.
The Applicable Law
Doing the best the Court can to understand the Respondent’s case, s.52 of the Bankruptcy Act 1966 (hereafter referred to as ‘the Act’) appears to be the section that is most relevant.
Proceedings and order on creditor's petition
(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.
(1A) If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver before the end of the period of 2 days beginning on the day the order was made.
Penalty: 5 penalty units.
Note: See also section 277B (about infringement notices).
(1B) Subsection (1A) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code .
(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.
(3) The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.
(4) A creditor's petition lapses at the expiration of:
(a) subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or
(b) if the Court makes an order under subsection (5) in relation to the petition--the period fixed by the order;
unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.
(5) The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor's petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order.
Again, doing the best the Court can to understand the Respondent’s concerns, those contentions may be summarised as legal arguments to the effect that:
a)the debt on which the Petitioning Creditor relies is not still owing;
b)there is other sufficient cause for the sequestration order not to be made; and
c)she is otherwise able to pay her debts.
There is, of course, substantial case law that deals with these issues, but this will be discussed in the context of the evidence, where relevant.
The Respondent as a Self-Represented Litigant
The Full Court of the Federal Court in SZRUR v Minister for Immigration and Border Protection [2013] FCAFC 146 (29 November 2013) recently considered the Court’s duty to unrepresented litigants at [37] quoting extensively from the case cited:
Consideration
37. In Hamod v State of New South Wales and Anor [2011] NSWCA 375 the Court, Beazley, Giles and Whealy JJA, said:
Courts’ duty to unrepresented litigants
[309] Courts have an overriding duty to ensure that a trial is fair: Dietrich v R [1992] HCA 57; 177 CLR 292. This entails ensuring that the trial is conducted fairly and in accordance with law: MacPherson v R [1981] HCA 46; 147 CLR 512 per Gibbs CJ and Wilson J at [16] 525. The duty reposes in the individual judicial officer hearing a case. In the context of an unrepresented litigant, the duty requires that a person does not suffer a disadvantage from exercising the recognised right of a litigant to be self-represented: R v Zorad (1990) 19 NSWLR 91 at 94–95. In MacPherson Mason J, at [31] 534, noted that:
A trial in which a judge allows an accused to remain in ignorance of a fundamental procedure which, if invoked, may prove to be advantageous to him, can hardly be labelled as “fair”.
[310] However, the court’s duty is not solely to the unrepresented litigant. The obligation is to ensure a fair trial for all parties. For this reason, the duty is usually stated in terms that require that the impartial function of the judge is preserved, whilst also requiring the judge to intervene where necessary to ensure the trial is fair and just: Tomasevic v Travaglini [2007] VSC 337; 17 VR 100 at [95]; Barghouthi v Transfield Pty Ltd [2002] FCA 666; 122 FCR 19, 23; NAGA v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 944, [11]; Nagy v Ryan [2003] SASC 37, [52]–[53].
[311] Insofar as the duty relates specifically to an unrepresented party, it has been said that a trial judge has an obligation to take appropriate steps to ensure that the unrepresented litigant has sufficient information about the practice and procedure of the court, so far as is reasonably practicable for the purpose of ensuring a fair trial. The application of that principle will vary depending upon the circumstances of the case: Jae Kyung Lee v Bob Chae-Sang Cha per Basten JA at [48]. See also Abram v Bank of New Zealand (1996) ATPR 41-507, 43,341, 43,347; Microsoft Corporation v Ezy Loans Pty Ltd (2004) 63 IPR 54; Pezos v Police (2005) 94 SASR 154.
[312] Although the duty of a trial judge to assist an unrepresented litigant is cast in active terms, it does not extend to advising the accused as to how his or her rights should be exercised: R v Gidley (1984) 3 NSWLR 168. Rather, the judge has to put the unrepresented litigant in the position of being able to make an effective choice, a duty which applies notwithstanding the adversarial character of a criminal trial: McPherson per Mason J at 534. The duty is the same in a civil proceeding, with such modifications as are called for to take account of civil procedures. However, it is not the function of the court to give judicial advice to, or conduct the case on behalf of, the unrepresented litigant: Bhagwanani v Martin (1999) 204 LSJS 449; [1999] SASC 406; Clark v New South Wales (No 2) [2006] NSWSC 914.
[313] The touchstone at all times remains that of fairness. In Rajski v Scitec Corporation Pty Ltd (Court of Appeal, 16 June 1986, unreported) Samuels JA, at 14, stated:
But the court should be astute to see that it does not extend its auxiliary role so as to confer upon a litigant in person a positive advantage over the represented opponent … At all events, the absence of legal representation on one side ought not to induce a court to deprive the other side of one jot of its lawful entitlement … An unrepresented party is as much subject to the rules as any other litigant.
[314] Thus, a trial judge is entitled to reprimand an unrepresented litigant if the judge believes that the litigant is trifling with the court: see Galea v Galea (1990) 19 NSWLR 263 at 283 per Meagher JA; Michael v Western Australia [2007] WASCA 100 at [64] per Steytler P (McLure JA and Miller AJA agreeing); Jae Kyung Lee v Bob Chae-Sang Cha at [84] per Basten JA.
[315] There may be a fine tension in striking the balance between providing assistance to an unrepresented litigant and ensuring a fair trial for all parties. However, it is the task of the judge to strike that balance. In Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 at 446 the Full Federal Court dealt with the tension between the duty of the trial judge to ensure a fair trial and the requirement of impartiality:
A trial judge often faces something of a dilemma. While he or she may be bound to provide some advice and assistance to an unrepresented litigant, the authorities make it clear that the Judge should not intervene to such an extent that he or she cannot maintain a position of neutrality in the litigation: Burwood Municipal Council v Harvey (1995) 86 LGERA 389 at 397 (NSW CA), per Kirby P. However, the boundaries of legitimate intervention are flexible and will be influenced by the need for intervention to ensure a fair and just trial: Panagopoulos v Southern Healthcare Network (unreported, Supreme Court, Vic, Smith J, 15 September 1997) at 6.
[316] The position can be stated no more clearly than reiterating that the judge must remain at all times the impartial adjudicator of the matter, measured against the touchstone of fairness.
Chief Justice Allsop said at [53]:
Dealing with litigants as persons is difficult.
He reiterated this point at [54] to [55]:
54. He should have been sworn and possibly, at the end of that evidence, he may have been required to be told of the inadequacy of the matters thus far, and of the issues that he had to address. He may not have been able to do so, but that is not the point. These are difficult cases. Nevertheless, that difficulty does not mean that they should be dealt with other than with due procedural care and, where necessary, important formality.
55. The appellant is entitled, and was entitled, to a hearing reflecting the indicia of the exercise of the judicial power of the Commonwealth. He may well have lost his case, but he is entitled to lose his case after a hearing which has afforded him procedural fairness as an incident of the exercise of the judicial power of the Commonwealth.
How do these principles apply for the facts of this case? The emphasis must be on providing to the litigant in person a fair hearing whilst not being unfair to the other litigant. Sometimes, as in this case, this can only be achieved by attempting to identify the litigant in person’s substantive issue or concerns, notwithstanding that they may be poorly articulated, often without reference to the relevant law or legal principle. The focus must often be on substance rather than form provided there is no prejudice to the Applicant, and further provided the hearing is conducted in a manner that reflects the indicia of an exercise of the judicial power of the Commonwealth.
The Applicant’s Evidence Summarised
The Applicant filed Affidavits in support of the Creditor’s Petition and establishing the matter required under s.52 of the Act. The Applicant’s case was that no application was received to set aside the Bankruptcy Notice. Whilst there was an agreement between the agent for the Owners Corporation and the Respondent, through her son, about payment of the debt, the agreement was not complied with by or on behalf of the Respondent and so the Owners Corporation proceeded with the Creditor’s Petition. The Applicant’s case is that whilst there were subsequent negotiations about payment of the debt, no agreement was reached. The Applicant accepts that notices of motion to pay the Local Court judgments by instalments were in fact filed but, as the relevant judgments had not been stayed at the time of issue and service of the Bankruptcy Notice, there was no legal impediment to proceeding with the Creditor’s Petition. In any event, most of the debt relates to costs ordered in the District Court, in respect of which there is no evidence of an appeal from that decision. The Applicant contends that there is no issue, at any relevant time, about the authority of the Owners Corporation, or anyone instructed by it, to commence the proceedings against the Respondent. Moreover, to the extent that the Respondent was seeking to rely on a set-off arising out of some breach of duty on behalf of the Owners Corporation – arising out of injuries suffered by the now deceased mother, a former co-owner of the property – it is not a set-off that accrues to the Respondent, even if it had merit which it does not. The Applicant also argues that the Respondent has plainly misconstrued the impact of any legal defence costs insurance held by the Applicant, because it could not possibly benefit the Respondent in the circumstances of the present case. The Applicant also argues that all of the matters that the Respondent seeks to present before the Court in the present proceedings were matters that were rejected in the Local Court and/or the District Court.
The Respondent’s Case Summarised
The following is an attempt to summarise the concerns raised by the Respondent. This is gleaned primarily from her Affidavits, but also from her submissions. It was difficult, at times, to keep the Respondent on track and focused on relevant matters. Clearly this matter is very important to her. She presented her case with much commitment, indeed passion. She presented as someone who felt that she had suffered a grave injustice from the legal system. She impressed as an intelligent and articulate woman, though driven by subjectivity. It was not always possible to follow her train of thought.
It would appear that well before the commencement of these proceedings, there had been a long-running dispute between the Respondent, her late mother, and the Owners Corporation of the property in which they lived. The substance of the dispute was about maintenance issues, but it is unclear from the evidence whether this related to common property, or to the strata lot owned by the Respondent, and her late mother. The Respondent was aggrieved by the Owners Corporation’s lack of appreciation for what the Respondent and her mother, in fact, did for themselves in terms of maintenance, even though these were more properly construed as obligations of the Owners Corporation. The Respondent clearly felt that she had not received value for money, in terms of the strata levies that had been paid over many years.
The Respondent raised concerns about not having been served with the original Local Court documentation. Moreover, she asserts that as the result of an injury that her late mother suffered on the property (again, unclear whether common property or her strata lot) she had a cross-claim against the Owners Corporation.
The Respondent had concerns about all of the legal proceedings commenced against her and whether it had been properly authorised in the first place by the Owners Corporation, which, she asserts, was required to pass a particular form of resolution at a properly constituted meeting, but had failed to do so. From the Respondent’s perspective, this meant the proceedings were not properly constituted on behalf of the Applicant, and those representing the Applicant, in fact, lacked authority to do so.
The Applicant acknowledges that she appealed the decisions of the Local Court, but her appeal was struck out and a costs order was made against her. However, she expresses not just frustration, but deep concern about the nature of the proceedings, both in the Local Court and the District Court.
The Respondent alleges that there was an agreement between the managing agent and herself, via the agency of her son, in relation to the payment of the debt.
Moreover, the Respondent contends that the Owners Corporation legal insurance covers the legal costs that the Applicant now seeks to recover against her.
The Respondent is clearly aggrieved by what she perceived to be the unconscionable treatment that she has received from the Applicant, and indeed the entire legal system.
The Respondent’s mother died on 15 April 2014. The Respondent was a co-owner as tenants-in-common in equal shares with her late mother. The share in the property of her late mother has not yet been transmitted into her name. Historically, the property was owned by the Respondent’s mother and father, but her father died, and then, for reasons that are not relevant to the present proceedings, the Respondent came on title with her mother, initially as joint tenant, but subsequently as tenants-in-common.
Credit issues
Two witnesses gave evidence in the case. Tracey Payne, the deponent of the witness in the Applicant’s case, gave evidence and was cross-examined by the Respondent. The Respondent gave evidence, and was cross-examined by Mr Koski, the solicitor for the Applicant.
Ms Payne is a strata manager employed by Illawarra Strata Management Pty Limited, which was engaged by the Owners Corporation. She swore two Affidavits in this case, 24 June 2014 and 11 September 2014. Ms Payne gave evidence in a straightforward, matter-of-fact manner, consistent with her being a disinterested, objective person who performed her duties as strata manager to the best of her ability. No issues of credit arise from her cross-examination. Specifically, as a result of Ms Payne’s evidence, the Court finds, firstly, that there was no agreement between the Applicant and the Respondent and/or her late mother that levies would somehow be waived, or suspended as a result of the matters referred to by the Respondent including, without limiting the generality of the foregoing, that were claimed to have been done on the property, and the accident allegedly suffered by the Respondent’s late mother, presumably on common property. Furthermore, the Court finds that there was an agreement between the Applicant and the Respondent about the payment of the arrears of levy, but it was an agreement that was not honoured on behalf of the Respondent, and thus the Owners Corporation proceeded to recover the debt.
The Respondent gave evidence as well. She was rarely responsive to the questions that were asked on the contentious matters. She was plainly evasive when questioned about her access to Owners Corporation records. She frequently made assertions in response to questions in cross-examination that were uncorroborated by documents which must have been in existence if what she contended to be the case was, in fact, the case. Whilst the Respondent clearly meant well, she was an unconvincing witness. The Court does not find her to be dishonest, but rather to be operating from a different version of perceived truth.
The Respondent was clearly aware of the importance of calling her son to give evidence about the terms of any alleged agreement for payment of the debt with the Owners Corporation. She gave no convincing reason as to why he could not attend to give this evidence. She agreed in cross-examination that she had raised the issue of the Owners Corporation’s authority to act with Judge Gibson the District Court. She agreed that Judge Gibson nonetheless made the order for costs against her. The Respondent is convinced in her own mind, however, that despite this, Judge Gibson did not deal with the substantive issue. She did not cavil with the judgment debts as such.
The Court concludes that the evidence of the Respondent needs to be carefully examined before accepting it. Insofar as it conflicts with the evidence advanced in the Applicant’s case, those consistencies should be resolved in favour of the Applicant.
The legal issues raised
Bearing in mind that it was not always apparent precisely what arguments were being raised on behalf of the Respondent, the Court will nonetheless do the best it can to deal with the issue that appear to have been raised by her.
Whilst not expressly raised in the Respondent’s case, what is abundantly clear is that an Owners Corporation is entitled to levy a contribution against co-owners of a lot in a strata plan, and such co-owners are jointly and severally liable for the payment of the levy as well as interest: s.78(3) Strata Schemes Management Act 1996 (NSW). There is no issue in this case, therefore, as to the Respondent’s liability in respect of levies that might have been incurred during a period when she co-owned the property with her now deceased mother.
The Respondent argued that the two Local Court judgment debts were obtained by the Applicant on the basis of actions taken by the strata manager without consent. Specifically, she asserts that the legal action against her had to have been approved by a general meeting, which did not take place.
Clearly, the Respondent’s contention in this regard is wrong. Section 80D of the Strata Schemes Management Act 1996 provides:
80D Legal action to be approved by general meeting
(1) An owners corporation or executive committee of an owners corporation must not seek legal advice or the provision of any other legal services, or initiate legal action, for which any payment may be required unless a resolution is passed at a general meeting of the owners corporation approving the seeking of the advice or services or the taking of that action.
(2) The regulations may make provision for or with respect to exempting any type of legal service or legal action from the operation of this section.
Regulation 15 of the Strata Schemes Management Regulation 2010 provides:
15 Exemptions from need for approval for certain legal action
(1) The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action would not exceed:
(a) an amount equal to the sum of $1,000 for each lot in the strata scheme concerned (excluding utility lots), or
(b) $12,500,
whichever is the lesser.
(2) In a case where the cost, or estimated cost, of seeking legal advice, having legal services provided or taking legal action has been:
(a) disclosed by the Australian legal practitioner concerned in accordance with the Legal Profession Act 2004 , or
(b) set out in a proposed costs agreement under that Act,
the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action is taken, for the purpose of this clause, to be the cost or estimated cost so disclosed or set out.
(3) The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if its purpose is to recover unpaid contributions and interest under section 80 of the Act.
Subregulation (3) is quite explicit in stating that s.80D of the Strata Schemes Management Act does not apply if the purpose of the legal service is to recover unpaid contributions and interest under s.80 of the Strata Schemes Management Act. Section 80 of the Act provides:
How does an owners corporation recover unpaid contributions and interest?
(1) An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.
(2) Interest paid or recovered forms part of the fund to which the relevant contribution belongs.
Not even the Respondent contends that the original judgment debts in the Local Court did not relate to a s.80 contribution. Indeed, it would have been impossible to make this contention based on the documents that the Respondent herself tendered in evidence, including the levy notices and the documents relating to the Local Court litigation against her.
The Respondent’s argument is unassisted by reference to s.230 of the Strata Schemes Management Act, because that section expressly refers to Chapter 5, which has no application to the present dispute.
The Respondent also relied on s.230A of the Strata Schemes Management Act, which states:
Disclosure of matters relating to legal costs
If a disclosure under Division 3 of Part 3.2 of the Legal Profession Act 2004 is made to an owners corporation in respect of the costs of legal services to be provided to the owners corporation, the owners corporation must give a copy of the disclosure to each owner and executive committee member within 7 days of the disclosure being made.
The Court will assume that the Respondent contends that the Owners Corporation has not complied with the requirement on it under s.230A to provide a copy of the disclosure under the Legal Profession Act 2004 to each owner within seven days of the disclosure being made. The evidence about this is unclear. Assuming, for the moment, that the Respondent were correct in her assertion, would it make any difference? The disclosure in question is disclosure in relation to the costs of legal services to be provided to the Owners Corporation. Section 301 of the Legal Profession Act sets out the purposes of Part 3.2 of Division 3 of the said Act:
Purposes
The purposes of this Part are as follows:
(a) to provide for law practices to make disclosures to clients regarding legal costs,
(b) to regulate the making of costs agreements in respect of legal services, including conditional costs agreements,
(c) to regulate the billing of costs for legal services,
(d) to provide a mechanism for the assessment of legal costs and the setting aside of certain costs agreements.
The consequences of failure to disclose are set out in s.317 of the said Act, as follows:
Effect of failure to disclose
(1) Postponement of payment of legal costs until assessed If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer (as the case may be) need not pay the legal costs unless they have been assessed under Division 11.
Note : Under section 369, the costs of an assessment in these circumstances are generally payable by the law practice.
(2) Bar on recovering proceedings until legal costs assessed A law practice that does not disclose to a client or an associated third party payer anything required by this Division to be disclosed may not maintain proceedings against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been assessed under Division 11.
(3) Setting costs agreement aside If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed and the client or associated third party payer has entered into a costs agreement with the law practice, the client or associated third party payer may also apply under section 328 for the costs agreement to be set aside.
(4) Reduction of legal costs on assessment If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, then, on an assessment of the relevant legal costs, the amount of the costs may be reduced by an amount considered by the costs assessor to be proportionate to the seriousness of the failure to disclose.
(5) Effect on legal costs where law practice retains another law practice that fails to disclose If a law practice retains another law practice on behalf of a client and the first law practice fails to disclose something to the client solely because the retained law practice failed to disclose relevant information to the first law practice as required by section 310 (2), then subsections (1)-(4):
(a) do not apply to the legal costs owing to the first law practice on account of legal services provided by it, to the extent that the non-disclosure by the first law practice was caused by the failure of the retained law practice to disclose the relevant information, and
(b) do apply to the legal costs owing to the retained law practice.
(6) Circumstances where associated third party payer involved In a matter involving both a client and an associated third party payer where disclosure has been made to one of them but not the other:
(a) subsection (1) does not affect the liability of the one to whom disclosure was made to pay the legal costs, and
(b) subsection (2) does not prevent proceedings being maintained against the one to whom the disclosure was made for the recovery of those legal costs.
(7) Non-disclosure capable of constituting unsatisfactory professional conduct or professional misconduct Failure by a law practice to comply with this Division is capable of being unsatisfactory professional conduct or professional misconduct on the part of any Australian legal practitioner or Australian-registered foreign lawyer involved in the failure.
Thus, even if there was non-compliance with s.230A of the Strata Schemes Management Act, it is not a right that accrues to the Respondent, but it is a right that accrues to the Owners Corporation, who has certain rights under s.317 of the Legal Profession Act.
The Respondent also argued that the Owners Corporation had no power to engage a debt collection agency. She referred to s.28 of the Strata Schemes Management Act:
What functions of an owners corporation can a strata managing agent exercise?
(1) An owners corporation may, by the instrument appointing a strata managing agent or some other instrument, delegate to the strata managing agent:
(a) all of its functions, or
(b) any one or more of its functions specified in the instrument, or
(c) all of its functions except those specified in the instrument,
but only if authorised to do so by a resolution at a general meeting and subject to subsection (3).
(2) An owners corporation may, if authorised to do so by a resolution at a general meeting, revoke a delegation under this section.
(3) An owners corporation cannot delegate to a strata managing agent its power to make:
(a) a delegation under this section, or
(b) a decision on a matter that is required to be decided by the owners corporation, or
(c) a determination relating to the levying or payment of contributions.
(4) A function delegated under this section may, while the delegation remains unrevoked, be exercised from time to time in accordance with the delegation.
(5) A delegation under this section may be made subject to such conditions or such limitations as to the exercise of all or any of the functions, or as to time or circumstances, as may be specified in the instrument of delegation.
(6) Despite any delegation made under this section, the owners corporation may continue to exercise all or any of the functions delegated.
(7) Any act or thing done or suffered by a strata managing agent while acting in the exercise of a delegation under this section:
(a) has the same effect as if it had been done or suffered by the owners corporation, and
(b) is taken to have been done or suffered by the owners corporation.
It is difficult to understand the Respondent’s argument in this regard. Exhibit A1 consists of the Strata Management Agency Agreements dated 25 June 2010 and 19 August 2013. Illawarra Strata Management Pty Limited appears to have been engaged by the Owners Corporation to manage the strata plan. The Court did not understand the Respondent to be challenging this arrangement. However, the Respondent received demands for payment of outstanding levies from a company called Collection Corporation of Australia Pty Limited, presumably a collection manager or collection agency, engaged on behalf of Illawarra Strata Management Pty Limited. The levy notices the Respondent herself produces makes it quite clear, however, that the levies were issued by the duly appointed strata manager. There is no doubt that Collection Corporation of Australia played a role in the recovery proceedings against the Respondent. Was there an impermissible delegation by the strata manager to the said corporation, contrary to the provisions of s.28(3) of the Strata Schemes Management Act? The answer is clearly no. The argument is misconceived. Section 28(3) proscribes a strata managing agent sub-delegating a power that the Owners Corporation has given to it. It does not prevent a strata managing agent, for example, employing a person to assist the strata managing agent carry out a function that is properly delegated to it. The engagement of Collection Corporation of Australia Pty Ltd by the Owners Corporation was no more an impermissible delegation of its powers than it would be for the strata managing agent to engage a plumber to effect repairs to the common property. Indeed, the plumber might exercise a far higher degree of independent professional autonomy about how plumbing work was implemented compared to a debt collection agency engaged by a strata managing agent who is duly engaged by the Owners Corporation to recover unpaid levies.
The Court does not accept any of the Respondent’s argument about that lack of authority to commence the proceedings, and persist with the proceedings against her. She invited the Court to closely scrutinise compliance issues surrounding the litigation against her. But these procedures are not found wanting. All the evidence before the Court indicates that the Owners Corporation had property retained strata scheme managers to manage the strata plan, which included recovery of unpaid levies, and which properly authorised the use of appropriate experts such as a debt collection agency, and solicitors, to pursue the proceeding in question. The proceeding in question, it should be remembered, was necessitated by the Respondent’s default.
To the extent that the Respondent asserted that she, or even her late mother for that matter, had some form of cross-claim against the Applicant arising out of something that may, or may not have happened, either on private property, or on the common property, it was incumbent on her to produce evidence about this in clear terms. No such evidence was adduced. Even taking the Respondent’s case at its highest, even if her mother did have a fall on common property, it was her mother’s cause of action and not hers, a conclusion that is unchanged by the fact of her mother’s death, or the fact that the Respondent may have held her mother’s power of attorney at one stage.
The Respondent also relied on insurance policies in relation to costs. Doing the best the Court can to understand the Respondent’s argument, it seems to be that as the Applicant was insured for the legal costs incurred in the proceedings against her, there was no basis for the claim against her for the costs incurred in the District Court proceedings. The Respondent produced in evidence two residential strata insurance policies. There is no evidence that links these documents to the Applicant. But, once again, accepting the Respondent’s case at its highest, the Court was prepared to look at the insurance policies to see if they support the Respondent’s contention. The first policy is a CHU residential strata insurance plan. Part C of policy 9 covers legal defence expenses. The policy details commence at page 51 of the policy document. What becomes apparent from even a cursory reading of the policy wording is that it covers claims against the Owners Corporation, not costs incurred in proceedings initiated by the Owners Corporation. The second policy is a Strata Unit Underwriter’s residential strata insurance policy. Section 9 deals with legal expenses. Again, even a cursory examination of the policy wording commencing at page 36 makes it clear that the Owners Corporation is covered for legal expenses that it is liable to pay following legal proceedings brought against it. The legal costs insurance argument has no merit.
The Respondent’s contention about an agreement with the Applicant in relation to payment of the judgment debt is simply not supported by the evidence that she advances in her case. The Court prefers the evidence of the strata manager Ms Payne, to the effect that what agreement there was was not honoured by the Respondent. Curiously, if there was an agreement as alleged by the Respondent, which the Respondent alleged was honoured, she could have easily produced evidence of payment pursuant to this agreement. No such evidence was in fact adduced.
Application of section 52 Bankruptcy Act
Subject to the matters to be discussed below, the formal requirements for the granting of the Creditor’s Petition, in terms of the evidence to be adduced, have been satisfied. The issue is whether the matters raised by the Respondent give reason to decline to make the sequestration order against her estate.
In substance, the Respondent was inviting the Court to go behind the judgments entered against her, both in the Local Court and the District Court. There is no doubt that this Court has the jurisdiction to go behind a judgment to see whether in truth and reality there is a debt. The general rule, of course, is that a Court would not do so unless it could be shown that there is a prima facie case of fraud, collusion, or miscarriage of justice: Corney v Brien (1951) 84 CLR 343 at 356-7. Chief Justice Barwick, with whom Justices Windeyer and Owen said in Wren v Mahoney (1972) 126 CLR 212 at 224-5 that:
The emphasis is upon the paramount need to have satisfactory proof of the petitioning creditor’s debt. The Court’s discretion, in my opinion, is the discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was, in truth and reality, a debt due to the petitioner.
The judgments in question were neither consent judgments nor default judgments. The Respondent opposed the litigation commenced against her at each stage, with a consistent lack of success. The Applicant’s complaint to this Court is that the Respondent is, in effect, presenting the same arguments that were rejected in both the Local Court and the District Court, probably has some substance. But nonetheless, the Respondent’s complaint is that her arguments have not been dealt with, presumably in some form of judgment where a Court explains to her why her arguments have been rejected. On the facts of this case, however, the Court has examined the Respondent’s arguments and has rejected them, and thus there is no basis for going behind the judgments which appear to have been regularly and properly obtained. Despite what the Respondent may think, or feel, there is no evidence of fraud, collusion, or miscarriage of justice. The strata levies were not paid. They remain unpaid. Her actions have caused the Owners Corporation to, no doubt, incur significant legal costs in the recovery proceedings. The Respondent appealed to the District Court and lost. A costs order has been made against her. She has not established any reason why she should not have to pay. The debts on which the petitioning creditor relies are still owing.
To the extent that the Respondent is arguing that she is able to pay her debts, she has not established this to the Court’s satisfaction. The evidence, at its highest, and accepting the Respondent’s own representations to the Court, is that she has an unencumbered property of a value in excess of $300,000, and in respect of which she is the half owner in law, with the other half expected to be transmitted into her name once she obtains probate of her late mother’s will. In ANZ Banking Group Limited v Foyster [2000] FCA 400, Healy J at paragraph 17 states:
The onus with proving sufficiency of assets lies on the respondent. It is not sufficient for the respondent simply to establish that he has assets which exceed his liabilities in value. It must also be established that the assets are available to be realised and that they are capable of ready realisation.
The Court cannot help but observe that if the Respondent had spent but a tiny fraction of the energy that she has invested in defending the proceedings by the Applicant into a reorganisation of her financial affairs so that a comparatively small debt could be paid, the situation would be completely different for her. She may well be an intelligent and articulate woman, but she is one on a crusade.
Section 52(2) invites the court to consider whether there might, on the evidence before it, be other sufficient cause for the sequestration order not to be made. Do any of the other matters raised by the Respondent give rise to cause to invoke this discretion? In Klinger v Nicholl [2005] FCAFC 153, Justice Emmett, with whom Justices Moore and Tamberlin agreed, said at paragraph 32:
For a matter to constitute sufficient cause to decline to make a sequestration order, when the prerequisites of section 52, 43 and 44 of the Act have otherwise been satisfied, the matter must be one of significant weight to displace the interest of the community in avoiding insolvent trading.
The evidence before the Court indicates that all the necessary prerequisites to the making of a sequestration order have been satisfied. None of the other arguments raised by the Respondent have sufficient merit to displace the interests of the community in this case. The making of an instalment order is no reason not to proceed with the bankruptcy, as the execution of the judgment has not been stayed. The arguments about the lack of authority to commence the proceedings have no merit. There is no agreement between the parties about the payment of the debt, which was honoured by the Respondent.
The alleged claims against the Applicant, be they cross-claim or set off, have no merit. There is simply no other basis for exercising the Court’s discretion in favour of the Respondent. The Court is unable to discern any other basis that might be invoked on behalf of the Respondent to avoid the making of a sequestration order.
Conclusion
Having regard to all of the evidence, the Court is satisfied that there is proof of the matters required to be established under s.52(1) of the Bankruptcy Act 1966. The grounds for granting the petition set out in s.52 have been established. The petition should be granted. A sequestration order should be made against the estate of Marianne Rose Beck. The Applicant’s costs be taxed and paid from the estate of the Respondent in accordance with the Act. The Court notes that the date of the act of bankruptcy is 26 November 2013.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date: 19 December 2014
Key Legal Topics
Areas of Law
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Property Law
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Civil Procedure
Legal Concepts
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Appeal
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Costs
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Jurisdiction
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Procedural Fairness
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