Westpac Banking Corporation v Hughes - [2008] FMCA 424

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WESTPAC BANKING CORPORATION v HUGHES & ANOR

[2008] FMCA 424

BANKRUPTCY – Applications to review sequestration order made by Registrar – solvency asserted on basis of selling matrimonial home – necessity for prompt resolution – consideration of Totev v Sfar.

Bankruptcy Act 1966, ss.52, 52(1), 52(2), 153B
Bankruptcy Rules 2006, r.4.06

Totev v Sfar [2008] FCAFC 35
Walton v Keller [2005] FMCA 878
Kyriacou v Shield Mercantile Pty Ltd (No.2) [2004] FCA 1338

Applicant:

WESTPAC BANKING CORPORATION

First Respondent:

DIANE JANE HUGHES

Second Respondent:

KEITH THOMAS BAGOT HUGHES

File Number:

MLG 832 of 2007

Judgment of:

Burchardt FM

Hearing date:

7 March 2008

Date of Last Submission:

7 March 2008

Delivered at:

Melbourne

Delivered on:

15 April 2008

REPRESENTATION

Counsel for the Applicant/Respondent:

Mr P. Fary

Solicitors for the Applicant/Respondent:

Gadens Lawyers

Counsel for the Respondents/Applicants:

Mr D. Moller

Solicitors for the Respondent/Applicants:

Lennon Mazzeo Lawyers

Counsel for the Trustee:

Mr J. Sinisgalli

Solicitors for the Trustee:

Hunt & Hunt

Counsel for the Australian Taxation Office (Supporting Creditor):

Ms Nguyen

Solicitors for the Australian Taxation Office (Supporting Creditor):

Australian Taxation Office Legal Services Branch

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT MELBOURNE

MLG 832 of 2007

WESTPAC BANKING CORPORATION

Applicant

And

DIANE JANE HUGHES

First Respondent

KEITH THOMAS BAGOT HUGHES

Second Respondent

REASONS FOR JUDGMENT

Introduction

This matter has had a relatively lengthy history. It is highly desirable in the interests of all concerned that it be brought to a conclusion as quickly as is in any way properly possible. For that reason, and because I have come to a clear view as to what the outcome should be, these reasons are going to be shorter rather than longer.
Mr and Mrs Hughes seek a review of sequestration order made against their estates by a Registrar of this Court on 23 October 2007. They do so on the express basis that they are solvent (see Outline of the Applicants on the application – paragraph 4, and oral submissions).
For the reasons that follow I have come to the conclusion that the sequestration order made against Mrs Hughes should be annulled and the creditor’s petition (“petition”) reinstated and that the application made by Mr Hughes should be dismissed.

Preliminary Matters

It is clear from the recent decision of the Full Court of the Federal Court in Totev v Sfar [2008] FCAFC 35 (“Totev”), (Emmett, Bennett and Cowdroy JJ) that this proceeding is a hearing de novo and
the judge who hears the review application must hear the petition afresh and must be satisfied as to the matters referred to in section 52 of the Bankruptcy Act. (per Emmett J at [14])
I am therefore required to be satisfied with the proof of the matters stated in the petition, the service of the petition and the fact that the debt upon which the petitioning creditor relies is still owing, additionally to also exercising afresh the discretions conferred by s.52(2) of the Bankruptcy Act

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] FMCA 424
Decision Date: 15 April 2008

CaseChat Overview and Summary

The Federal Magistrates Court of Australia heard the case of Westpac Banking Corporation v Hughes, involving a review of a sequestration order made against Diane Jane Hughes and Keith Thomas Bagot Hughes by a Registrar of the Court. The respondents argued that they were solvent, basing their solvency on the sale of their matrimonial home in Richmond. The case required the court to determine the legal issues surrounding the de novo review process and the solvency of the respondents. The court considered the recent decision in Totev v Sfar, which established that the review proceedings are a hearing de novo, requiring the judge to be satisfied afresh with the proof of the matters stated in the petition, the service of the petition, and the fact that the debt upon which the petitioning creditor relies is still owing.

The court found that the Hugheses were solvent, as Mrs Hughes could sell their home to discharge her debts and those of her husband. The court accepted the valuation of the property provided by the expert witness called on behalf of the Hugheses. However, the court found Mr Hughes to be insolvent, as his debts substantially exceeded his assets, and he had a history of neglecting his financial obligations. The court concluded that while Mrs Hughes' intention to sell the home could ground a finding that meets the requirements of the Bankruptcy Act, Mr Hughes' history in relation to his debts made it inappropriate to exercise the court's discretion in his favour. The court annulled the sequestration order against Mrs Hughes, subject to her providing an undertaking to sell the family home and discharge her debts within a short period. The sequestration order against Mr Hughes was to continue.

The court is yet to determine the appropriate form of orders in light of these reasons and the case Totev v Sfar. The parties will be heard on the matter, and any related arguments arising from Totev v Sfar will be considered.

Orders