The Owners - Strata Plan No 70798 v Khor
[2014] FCCA 887
•5 May 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| THE OWNERS - STRATA PLAN NO 70798 v KHOR | [2014] FCCA 887 |
| Catchwords: BANKRUPTCY – Creditor's petition – notice stating grounds of opposition – proceedings in the supreme court of NSW – whether counter-claim, set off or cross demand – whether other sufficient cause – sequestration order made. |
| Legislation: Bankruptcy Act 1966, ss.51, 52 Strata Schemes Management Act 1996 (NSW), s.80D |
| Corney v O’Brien (1951) 84 CLR 343 Wren v Mahoney (1972) 126 CLR 212 The Owners Strata Plan 70798 v Bakkante Constructions Pty Limited [2013] NSWSC 848 The Owners Strata Plan 70798 v Bakkante Constructions Pty Limited (No 2) [2013] NSWSC 1287 Singh v Deputy Commissioner of Taxation [2011] FCA 889 |
| Applicant: | THE OWNERS - STRATA PLAN NO 70798 |
| Respondent: | SIANG WOOI KHOR |
| File Number: | SYG 2876 of 2013 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 22 April 2014 |
| Date of Last Submission: | 22 April 2014 |
| Delivered at: | Sydney |
| Delivered on: | 5 May 2014 |
REPRESENTATION
| Solicitors for the Applicant: | Gilbert M Johnstone & Co |
| Respondent: | In person |
ORDERS
A sequestration order be made against the estate of Siang Wooi Khor.
That Brett Richard Geoffrey Harrison be appointed as trustee of the bankrupt estate of Siang Wooi Khor.
That the applicant’s costs be taxed and paid from the bankrupt estate in accordance with the Bankruptcy Act 1966 (Cth).
A copy of this sequestration order be given to the Official Receiver within 2 days.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2876 of 2013
| THE OWNERS - STRATA PLAN NO 70798 |
Applicant
And
| SIANG WOOI KHOR |
Respondent
REASONS FOR JUDGMENT
Background
On 20 November 2013 the applicant filed a Creditors Petition naming the respondent. The amount claimed as at 1 September 2013 represented:
a)Unpaid strata levies for which judgment was obtained in the Downing Centre Local Court on 14 August 2013 in proceedings number 2013/00205162;
b)Costs incurred after judgment;
c)Unpaid strata levies which became due and payable after the proceedings referred to above was issued but before the act of bankruptcy.
The total amount claimed was $17,135.49.
The act of bankruptcy relied on was the respondents failure to comply, on or before 22 October 2013, with the requirements of a Bankruptcy Notice served 1 October 2013, or to satisfy the Court that the respondent had a counterclaim, set-off or cross-demand equal to or exceeding the sum specified in the Bankruptcy Notice, being a counterclaim set-off or cross-demand that he could not have set up in the actions in which the judgment referred to in the Bankruptcy Notice was obtained.
The Creditors Petition was, at that time, supported by the usual affidavits relating to verification of the petition, service of the Bankruptcy Notice, search, debt and the trustees’ consent to act. As will be seen below, there is no relevant issue before the Court about the evidence supporting the Creditors Petition.
It is unclear whether the respondent, who represents himself, has actually filed Notice stating grounds of opposition to the petition or an affidavit in support. The only documents available to the Court in the regard are unsigned and unsealed. The Court will proceed on the basis that these documents have been filed and are in the proper form.
Regrettably, the Notice stating grounds of opposition does not make much sense. Those grounds state:
a)The petition is founded on a default judgment obtained by the applicant in the Downing Centre Local Court proceedings number 2013/205162 on 14 August 2013.
b)The respondent has applied to set aside the judgment debt with orders to stay proceedings pending determination by the Court.
c)This petition contravenes the interim orders made by the Local Court and serves to undermine due process in the Local Court.
The affidavit asserts that the judgment obtained by the applicant was a default judgment, that he sought a stay of the judgment, that he first became aware of the Creditors Petition on 3 December 2013, that he had commenced on 5 February 2014 proceedings in the Supreme Court of New South Wales against the applicant, and that there was a Supreme Court decision against the applicant that informed the outcome in this case. These matters will be explained in great detail below, to the extent that the Court can make sense of them. Reliance will need to be placed on the respondent’s written submissions.
Documents relied upon by the parties
The applicant’s documents were as follows:
a)Creditor’s Petition, filed on 20 November 2013;
b)Affidavit Verifying Petition, filed on 20 November 2013;
c)Affidavit of Service of Bankruptcy Notice, filed on 20 November 2013;
d)Affidavit Verifying Paragraph 4 of Petition, filed on 20 November 2013;
e)Trustee Consent to Act Declaration, filed 20 November 2013
f)Affidavit of Debt, filed 18 December 2013;
g)Affidavit of Search, filed 18 December 2013;
h)Affidavit of Thomas Daniel Koski, filed 15 April 2014
The respondent’s documents were as follows:
a)Notice stating grounds of opposition to application, dated 12 March 2014;
b)Affidavit of Siang Wooi Khor, purportedly affirmed 12 March 2014;
c)Notice of appearance, filed 21 March 2014.
Both parties provided written submissions.
Applicable law
There is no question about this Court’s power to make a sequestration order. The power is a discretionary one: section 51 Bankruptcy Act 1966. An issue in this case is whether the Court should go behind the judgment debt (indeed debts, as it turns out). The law is clear in this regard – a Court will not generally go behind such a judgment unless it can be shown that there is a prima facie case of fraud, collusion or miscarriage of justice: Corney v O’Brien (1951) 84 CLR 343 at 356-357. The Court may exercise its discretion to go behind a judgment if, for example, there are substantial reasons for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner: Wren v Mahoney (1972) 126 CLR 212 at 224-225.
Another issue in this case is whether there is “other sufficient cause” why a sequestration order ought not to be made: section 52(2)(b). This might include the existence of a set-off, cross-claim or cross-demand by the respondent against the applicant.
Contentions and evidence
There are some incontestable facts in this matter. Despite the respondent’s assertion there are in fact two Local Court judgments against him – proceedings 2012/00271384 and 2013/00205162. In respect of the first judgment a previous Creditors Petition had been lodged, but that debt is substantially paid. In respect of the second judgment there has been part payment, but substantial amounts remain unpaid. The respondent applied to set aside both judgments. A learned Local Court Magistrate considered the applications on their merits and dismissed both of them. As stated, these are incontestable facts on the evidence before the Court, and the respondent was able to say nothing to contradict these facts.
So what is the respondent contending? Doing the best the Court can to understand the respondent’s contentions they are as follows.
The respondent contends that the applicant itself, that is the Owners Strata Plan 70798, has not authorised the present application against the respondent, or in the alternative has authorised the immediate cessation of the proceedings. There is no evidence acceptable to the Court to support this contention. Exhibit A2 is a document that the respondent acknowledges he was the author of, despite it being purportedly signed by the Acting Secretary, Owners Corporation Strata Plan 70798. It is of questionable weight and authenticity. Exhibit A4 is a document that tends to suggest that administration of the Owners Corporation is in a state of disarray, but again does not support the respondent’s contentions.
The respondent contended that, in any event, the claim against him was initiated beyond power as there was no requisite meeting for the purposes of the legislation.
A number of statutory provisions are relevant in this regard:
a)Section 80D of the Strata Schemes Management Act 1996 (NSW):
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.
b)Regulation 15 of the Strata Schemes Management Regulation 2010 (NSW):
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.
The applicant asserted, and the respondent did not (indeed could not on the facts) deny, that the present proceedings were covered by regulation 15(3).
Moreover, the respondent did not assert that, at the time the proceedings were commenced, there were any issues about authority to commence the proceedings. This is not a matter raised before the Local Court in any event.
The respondent further contends that, somehow, the decisions of Pemberton J in The Owners Strata Plan 70798 v Bakkante Constructions Pty Limited [2013] NSWSC 848 and The Owners Strata Plan 70798 v Bakkante Constructions Pty Limited (No 2) [2013] NSWSC 1287 inform the present application. It seems clear from those decisions, and indeed the applicant does not deny, that in relation to that litigation the Executive Committee of the applicant acted ultra vires and in breach of section 80D of the Strata Schemes Management Act 1996 (NSW). If the respondent is asserting that the present litigation is also contrary to section 80D, that is clearly incorrect due to regulation 15(3). If the respondent is asserting that, in some way that he does not specify, the strata levies that are sought to be recovered from him are somehow referable to the Bakkante litigation, he still has not established that this was not something he could have raised in the Local Court proceedings.
The respondent’s next contention seems to be that there is “other sufficient cause” not to grant the petition because of litigation he has commenced against the applicant by way of Summons in the Equity Division of the Supreme Court of New South Wales, an unsealed copy of which is Exhibit A3. In this Summons the respondent seeks declarations that excuse him from his proportionate liability as a lot owner for levies incurred in respect of costs and liabilities in what appears to be the Bakkante litigation.
The first difficulty with this contention is that he advances no evidence to suggest that the levies sought to be recovered against him by the applicant fall into the category of levies in respect of which he seeks to be excused from his proportionate liability in the Supreme Court proceedings.
The second difficulty is that the respondent does not explain why this issue could not have been raised in the Local Court proceedings that led to the judgments against him.
The third difficulty for the respondent is that he has failed to establish to the Court’s satisfaction that the claim is likely to succeed, as opposed to merely arguable: Singh v Deputy Commissioner of Taxation [2011] FCA 889 at [14]. In this regard, the claim in respect of breach of fiduciary duty and equitable compensation seems far-fetched on the evidence before the Court. Indeed, as the solicitor for the applicant pointed out, it is not even clear that the summons has been filed in the Supreme Court.
The applicant’s solicitor provided to the Court a copy of a Statement of Claim in the Equity Division of the New South Wales Supreme Court by the respondent against the applicant. It is again unclear as to whether this has been filed and the relief sought is in similar terms to that contained in the Summons. The same conclusion applies to this document.
Doing the best the Court can to make sense of the respondent’s contentions, he raises a number of issues about the Local Court proceedings that resulted in the judgments against him. He fails to give any satisfactory explanation as to why his concerns could not have been raised in the Local Court. He has not sought to appeal the Local Court judgments.
Conclusion
Having regard to all of the above matters, the Court is not satisfied that the respondent has established any reason not to grant the petition and make the sequestration order. No grounds are established to go behind the Local Court judgments. There is no evidence to suggest that there is other sufficient cause to justify dismissing the petition.
The Court is satisfied as to all of the matters set out in section 52 of the Bankruptcy Act. Specifically, the Court is satisfied that the respondent committed the act of bankruptcy alleged in the petition. The Court is satisfied of the proof of the other matters required by section 52 of the Act. A costs order is appropriate.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date: 5 May 2014
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