Volkswagen Financial Services Pty Ltd v Valencia
[2024] FedCFamC2G 1412
•19 December 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Volkswagen Financial Services Pty Ltd v Valencia [2024] FedCFamC2G 1412
File number(s): MLG 1413 of 2024 Judgment of: JUDGE BINGHAM Date of judgment: 19 December 2024 Catchwords: PRACTICE AND PROCEDURE – BANKRUPTCY – interim application for an extension of time of over 200 days for the filing on an application for review of sequestration order made by a Registrar – trustee appointed – no reasonable explanation for substantial delay – significant prejudice to creditors and trustee – no evidence of solvency – application dismissed Legislation: Bankruptcy Act 1966 (Cth) s 52(1)
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 256(1)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy Rules) 2021(Cth) rr 2.02 and 2.03
Cases cited: Ashwood v Ashwood [2024] FedCFamC2G 88
Bechara v Bates [2021] FCAFC 34; 286 FCR 166
Division: Division 2 General Federal Law Number of paragraphs: 43 Date of last submissions: 29 November 2024 Date of hearing: 29 November 2024 Place: Melbourne Counsel for the Applicant: Mr Miller Solicitor for the Applicant: Collins & Stephens Solicitor for the Respondent: SLF Lawyers Solicitor for the Other: McInnes Wilson Lawyers ORDERS
MLG 1413 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: VOLKSWAGEN FINANCIAL SERVICES AUSTRALIA PTY LIMITED
Applicant
AND: CECILIA VERONICA VALENCIA
Respondent
ANDREW JOHN SCOTT, THE TRUSTEE OF THE BANKRUPT ESTATE OF CECILIA VERONICA VALENCIA
Interested Person
ORDER MADE BY:
JUDGE BINGHAM
DATE OF ORDER:
19 DECEMBER 2024
THE COURT ORDERS THAT:
1.Pursuant to r 2.02(3) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), the application for an extension of time for the Application for Review of a Registrar’s Decision lodged on 9 September 2024 is refused and the Application for Review is otherwise dismissed.
2.The scale costs of the Creditor and Trustee be paid from the estate of Cecilia Veronica Valencia.
AND THE COURT NOTES THAT:
A.The Orders of Registrar Curnow made on 14 December 2023 sequestrating the estate of Cecilia Veronica Valencia remain in full force and effect.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BINGHAM:
These proceedings come before me by way of an interim application filed by the respondent debtor on 7 November 2024 (Interim Application). The debtor, Cecilia Veronica Valencia, (Debtor) seeks an extension of time for the filing of an Application for Review (Review Application). The Review Application seeks review of the sequestration order of the Court made on 14 December 2023 pursuant to the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) (Sequestration Order).
BACKGROUND
On 20 February 2023 judgment was entered for the Debtor to pay the petitioning creditor (Creditor) the amount of $99,329.54 for money lent and interest. The Debtor also owed interest on judgment. The Creditor held security over the property of the Debtor to the value of $56,750 and consisting of a 2016 Land Rover Range Rover Sport TDV6 motor vehicle registered on the Personal Property and Security Register. The Creditor had an unsecured debt of $42,579.54.
On 16 May 2023 the Creditor commenced proceedings in this Court, the matter of MLG850/2023, and sought orders for substituted service of the Bankruptcy Notice BN 259305 issued on 21 March 2023 (Bankruptcy Notice) upon the Debtor. On 25 May 2023 Orders were made for the substituted service of the Bankruptcy Notice to the Debtor’s address in Sunshine West.
The Bankruptcy Notice was served on the Debtor on 23 June 2023.
On 8 August 2023 proceedings were commenced in this Court by the Creditor by way of a Creditor’s Petition (Creditor’s Petition). The Creditor’s Petition sought sequestration orders pursuant to s 43 of the Bankruptcy Act against the estate of the Debtor.
On 14 September 2023 the Creditor filed an interim application seeking that personal service of the Creditor’s Petition on the Debtor be dispensed with and for orders for substituted service.
On 20 October 2023 Orders were made dispensing with personal service on the Debtor. The orders for substituted service were twofold firstly sending the documents by ordinary prepaid post to the Debtor’s address in Sunshine West (Sunshine West Property) and by affixing to the fence of the Debtor’s Sunshine West Property an envelope addressed to the Debtor containing the documents. Service of the documents including the Creditor’s Petition was deemed to have been effected on 1 November 2023.
On 14 December 2023 the Registrar made Orders sequestrating the estate of the Debtor and for the Creditor’s costs in the amount of $14,77.23 to be paid from the Debtor’s estate. The Registrar noted that the act of bankruptcy date was 14 July 2023.
On 14 December 2023 Andrew Scott was appointed Trustee under s 164A of the Bankruptcy Act.
On 9 September 2024 the Debtor, then a litigant in person, filed an Application for Review seeking:
1.The orders dated 14 December 2023 made in this proceeding be set aside.
2.No order as to costs.
3.Extension of time order.
On 31 October 2024 this matter came before me for Directions. I made Orders for the filing of an application in a proceeding seeking an extension of time, subsequent hearing of this application and the filing of evidence and submissions.
On 7 November 2024 the Debtor filed the Interim Application and sought:
1. Pursuant to rule 21.02(2) of the Federal Circuit and Family Court of Australia Rules 2021 (Division 2) (General Federal Law) (Cth), the time within which to bring an application to review the orders made 13 December 2023 by Judicial Registrar Curnow be extended to the date of filing this application
2. Any other orders this Honourable Court deems fit.
The Interim Application was heard before me on 29 November 2024. The solicitor for the Debtor and Counsel for the Creditor appeared before me. The solicitor for the Trustee appeared as an interested person.
The Creditor relied upon its written submissions and the affidavit of Nicholas Gary Stephens filed 18 November 2024. The Debtor relied upon the written submissions filed 14 November 2024 and the affidavits of the Debtor filed 9 September 2024, 29 October 2024 and 12 November 2024. The Truste filed an outline of submissions on 18 November 2024 and affidavits of the Trustee on 30 October 2024, 18 November 2024 and 22 November 2024.
THE NATURE OF THE APPLICATION
Extension of time
The time for applying for review of the order of a Registrar is prescribed by r 2.02(3) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy Rules) 2021 (Cth) (Bankruptcy Rules). The application must be made within 21 days after the day on which the power was exercised.
Applications for review
A hearing under s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) seeking a review of a Registrar’s decision is a hearing de novo and the creditor’s petition is considered afresh. The review does not hinge, or focus, upon error in the decision of the Registrar.[1]
[1] Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 21.04.
In a hearing de novo the petitioning creditor is the true applicant and carries the onus of proving the application by bringing forward the evidence required by section 52(1) of the Bankruptcy Act. The debtor/bankrupt does not need to show error in the Registrar’s decision. The only onus of the debtor/bankrupt who actively opposes the creditor’s petition is to prove either solvency or any other sufficient cause under section 52(2).
Accordingly, the petitioning creditor must prove, and the Court must be satisfied, that the requirements for the making of a sequestration order have been established: Bechara v Bates [2021] FCAFC 34; 286 FCR 166.
If the Court concludes that the making of a sequestration order is appropriate, the Court will dismiss the review application, leaving the Registrar’s extant order in place. For good order, the Court should confirm or affirm the Registrar’s extant order.
CONSIDERATION
Extension of Time to make the Application for review
Rule 2.03 of the Bankruptcy Rules provides that the Application for Review of a decision of a Registrar must be made in accordance with Form B3A and filed within 21 days of the decision. The Review Application made by the Debtor was not made within the prescribed time under the Bankruptcy Rules.
My ability to extend the time to file the Review Application is discretionary and will turn on the facts of each case.
In Ashwood v Ashwood [2024] FedCFamC2G 88 (Ashwood) Judge Manousaridis considered the factors that would have to be considered by a Court where a debtor had not filed an application for review within the time prescribed by r 2.02(3). At paragraph [52] his Honour expressed the following opinion:
A debtor’s right, on an application for review of a Registrar’s sequestration order, to a de novo hearing of the creditor’s application for a sequestration order depends on the debtor having made an application for review within the 21 day period prescribed by r 2.02(3) of the Bankruptcy Rules. Where, however, a debtor has not applied for the review of the Registrar’s sequestration order within the 21 day period, the debtor must seek an order from the Court that the 21 day period be extended. That would require the exercise of discretion, and would bring into play factors that would not be relevant if an application for review were made within the 21 day period. The Court would have to consider whether there is a reasonable explanation for the delay; the length of the delay, what actions persons have taken on the faith of the sequestration order and whether, having taken such actions, extending the time for making an application for review will cause prejudice to such persons; and also whether there would be any arguable point in the Judge’s hearing of the creditor’s petition, such as would merit extending the time for the making of an application for review of the sequestration order.
In Ashwood, his Honour found that the debtor had filed her application for review within the time prescribed by the Bankruptcy Rules. It is not the case here. The Interim Application seeks an extension of time for filing of the Review Application. It is incumbent upon me to consider: whether there is a reasonable explanation for the delay, what is the length of the delay, what actions persons have taken on the faith of the sequestration order and whether taking such actions extending the time will cause prejudice to such persons and whether there would be any arguable point that would merit extending the time for making of an application for review of the sequestration order.
The Length of the Delay
The length of the delay is substantial, 249 days (eight months and five days).
The Debtor submitted that she first became aware of the sequestration order on 2 March 2024 and that in these circumstances the time for filing of the Review Application should commence on 2 March 2024 and not from 14 December 2023. I asked the solicitor for the Debtor whether she pressed this submission particularly in light of the substituted service orders of the Creditor’s Petition - she said that she did. The Debtor’s solicitor could not point me to any authority in support of her submission. In any event if time was to run from 2 March 2024 it would, as submitted by Counsel for the Creditor, still be a substantial delay of six months and seven days. I do not accept the Debtor’s submission that time should run from 2 March 2024 rather that 14 December 2023. There is no legal or factual basis to support such a contention.
The Explanation for the Delay
The Debtor submitted that the delay was due to among other things a historical sexual assault serious health and medical problems in including hospitalisations and inadequate legal advice.
The Creditor submitted that the historical sexual assault in 2022 had no cogent relationship to the delay in filing the Review Application. On the Debtor’s own evidence she attended the Sunshine West Property once or twice a week, engaged lawyers and attended meetings with the Trustee.
It was further submitted by Counsel that hospitalisations may explain a short delay period but do not explain a continued delay. I accept both of these submissions.
The Debtor has had some form of legal representation and advice since March 2024 with respect to her sequestered assets but an application for review was not filed until 9 September 2024. The Debtor’s current lawyers are the fourth firm engaged by the Debtor in under twelve months. The Debtor complained that the advice from her legal representatives was not “constructive” but yet the evidence is that her legal representatives engaged with the Trustee on her behalf. I agree with the submission of Counsel for the Creditor that the Debtor has had adequate opportunity to file an application for review and extension of time.
The Debtor does not have a plausible explanation for the extent of her delay in filing the Review Application.
Prejudice
The Debtor submitted that the Creditor has not claimed that it will suffer any material prejudice. I do not accept this submission.
The Creditor submitted that it has and would continue to suffer prejudice if an extension of time to file the Review Application is granted. The Trustee concurs with this submission.
The substantive delay has caused the Trustee to incur costs and to continue to incur costs resulting in the reduction of the assets available to pay creditors.
The Sunshine West Property is subject to a mortgage which has not been serviced for 12 months and consequently equity is being eroded.
Further it is not only the petitioning Creditor that would be prejudice but also the Australian Tax Office to whom the Creditor has a large outstanding tax debt.
The Debtor has compounded the prejudice to the Creditor by delaying delivering the security vehicle and lodging a statement of affairs. The Creditor deposed to the extensive attempts to possess or have the security vehicle surrendered. The Debtor continues to retain the security vehicle contrary to court orders. The statement of affairs remains outstanding.
An Arguable Case
At a hearing de novo before a judge it will be incumbent on the Creditor to prosecute its petition, but the Debtor must prove solvency or any other sufficient cause in opposing the making of the sequestration order by a judge.[2]
[2] Bechara v Bates [2021] FCAFC 34; 286 FCR 166, [27].
The Debtor submitted that she would file further evidence about her capacity and that she is seeking a resolution with the Bank of Melbourne regarding the mortgage on the Sunshine West Property which would make it easier to settle the debt owed to the petitioning Creditor.
The Debtor has refused to file a statement of affairs and has not in any of the three affidavits filed in this proceeding addressed the issue of her solvency that is her income, her liabilities and financial circumstances. In the affidavit of the Trustee filed on 22 November 2024 the Trustee assessed, on the material available to him, that the Debtor has assets estimated to be between $774,350.00 and $904,350.00 and liabilities of $903,079.94 with the Trustee incurring further costs since 24 September 2024. On balance it is apparent that the Debtor is not solvent.
On the material before me it is apparent that the Debtor has no prospect of success in succeeding on a review.
Other Sufficient Cause
The Trustee submitted that it is against the public interest to allow an extension of time as it undermines the finality to litigation and ensuring the expeditious determination of bankruptcy proceedings by permitting a trustee to perform their role. I accept this submission.
CONCLUSION
For the reasons I have set out above I dismiss the Interim Application and as far is as necessary the Application for Review.
I will address the parties as to costs sought.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Bingham. Associate:
Dated: 19 December 2024
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