Wondal v The Owners - Strata Plan No.65578
[2015] FCCA 691
•31 March 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WONDAL v THE OWNERS – STRATA PLAN NO.65578 | [2015] FCCA 691 |
| Catchwords: BANKRUPTCY – Application to review sequestration order made by a Registrar – whether debt to petitioning creditor still owing – whether bankrupt has satisfied Court that she is able to pay her debts or as to other sufficient cause within s.52(2) of the Bankruptcy Act. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.41, 43, 44, 52, 153A, 153B |
| Eykamp v Deputy Commissioner of Taxation (2010) 8 ABC(NS) 105; [2010] FCA 797 Pattison v Hadjimouratis (2006) 155 FCR 226; [2006] FCAFC 153 Quitlong v ACM Group Limited [2011] FMCA 688 |
| Applicant: | SUSIANI WONDAL |
| Respondent: | THE OWNERS – STRATA PLAN NO.65578 |
| File Number: | SYG 2992 of 2013 |
| Judgment of: | Judge Barnes |
| Hearing dates: | 16 February 2015 and 16 March 2015 |
| Delivered at: | Sydney |
| Delivered on: | 31 March 2015 |
REPRESENTATION
| Applicant: | In person |
| Solicitors for the Respondent: | J S Mueller & Co |
| Solicitors for the Trustees of the Bankrupt Estate of Susiani Wondal: | Farrar Lawyers |
ORDERS
The Application for review filed on 12 November 2014 is dismissed.
The sequestration order made by a Registrar of this Court on 27 October 2014 is affirmed.
The Respondent’s costs of this application be taxed and paid out of the estate of the bankrupt in accordance with the Bankruptcy Act 1966 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2992 of 2013
| SUSIANI WONDAL |
Applicant
And
| THE OWNERS – STRATA PLAN NO.65578 |
Respondent
REASONS FOR JUDGMENT
Background
On 27 October 2014 a Registrar of this Court made a sequestration order against the estate of Susiani Wondal. There was no stay of the proceedings under the sequestration order.
On 12 November 2014 Ms Wondal lodged an application for review under s.104(2) of the Federal Circuit of Australia Act 1999 (Cth). This was within the time prescribed in r.2.03(1) of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) (Bankruptcy Rules).
In her application for review Ms Wondal claimed that she did not owe the money claimed by the petitioning creditor The Owners- Strata Plan No.65578 (The Owners) and also that she had money to pay if necessary. She filed an affidavit affirmed on 12 November 2014 in support of her application which took issue with calculation of the debt due to the petitioning creditor and claimed she had paid all her strata levies. She also raised an issue as to whether there was more than one judgment or order in favour of the petitioning creditor.
There is no evidence before the Court that Ms Wondal has given notice of her application for review to her creditors as required by r.7.06(3) of the Bankruptcy Rules. A form of notice was filed in these proceedings, but there is no evidence of service on any creditors. Ms Wondal indicated from the bar table that she gave a copy of that document to her Trustees in Bankruptcy. There were, however, appearances on 16 February 2015 for two supporting creditors, who also each filed an affidavit as to debt relied on by The Owners. These liabilities are considered further below. Given that, for the reasons that follow, I am not satisfied that the review should succeed, I have not considered whether the Court can or should dispense with the requirement of notice in r.7.03.
The Trustees of Ms Wondal’s bankrupt estate are Scott Darren Pascoe and Andrew Scott. Mr Scott prepared a detailed report annexed to an affidavit sworn on 28 January 2015 in relation to the bankrupt in accordance with orders of the Court (see r.7.06(6)). The Trustees were represented at the hearing.
At the hearing Ms Wondal, who at all times has been self-represented, had the assistance of an Indonesian interpreter. She indicated that she wished to rely on all the affidavits she had filed, both before and after the making of the sequestration order. Ms Wondal filed affidavits on 15 August 2014, 3 September 2014, 17 September 2014 and 12 November 2014. Ms Wondal filed a notice of opposition on 7 October 2014. She filed two affidavits, on 23 January 2015 and 11 February 2015 respectively, after she filed the Application for Review of the Registrar’s decision.
The petitioning creditor/Respondent to the Review Application also sought to rely on the affidavits that had been before the Registrar at the time of the sequestration order. In addition, the Respondent filed fresh affidavits of final search and final debt as required under r.4.06 of the Bankruptcy Rules and submitted that the Court should be satisfied of the matters in s.52(1) of the Bankruptcy Act 1966 (Cth) (the Act).
I heard the review application on 16 February 2015. Judgment was reserved. On 5 March 2015 Ms Wondal filed an Interim Application. She sought to restrain action by the Trustees in the administration of her bankrupt estate and that the Court relieve her of the obligation to file a Statement of Affairs or provide information or documents to her Trustees in Bankruptcy. In a supporting affidavit Ms Wondal merely asserted that she “did not owe levy money” as claimed. In addition, at the hearing on 16 March 2015 Ms Wondal sought to tender a letter of 13 November 2014 to her from Citibank. Notwithstanding that there was no formal application to re-open, no explanation for Ms Wondal’s failure to produce such evidence at the hearing and the limited relevance of this evidence (discussed further below) I granted Ms Wondal leave to tender and rely on this letter (and in that limited sense to re-open her case).
Ms Wondal raised a number of issues in her application, submissions and in her affidavits (which suffered from some defects as to form, content, admissibility and relevance, but to which no objection was taken). The issues she raised are discussed below.
An application to review a decision of a Registrar to make a sequestration order is to be considered by the Court as if it were a hearing de novo (see Totev v Sfar and Another (2008) 167 FCR 193; [2008] FCAFC 35). I have taken into account all of the material before the Court at the time of the review in considering whether the sequestration order ought to be set aside.
The Court may make a sequestration order on proof of the matters in s.52(1) of the Act (provided the jurisdictional requirements of s.43 and the conditions in s.44 of the Act are met). If the Court is not satisfied with proof of the matters in s.52(1) or is satisfied by the debtor that he or she is able to pay his or her debts or that for other sufficient cause a sequestration order ought not to be made it may dismissed the petition (s.52(2) of the Act).
Section 52(1) of the Bankruptcy Act 1966 (Cth)
It is convenient to consider first the requirements of s.52(1) which is 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.
The petitioning creditor bears the onus in this respect. Ms Wondal raised several issues with respect to these matters.
The Respondent relied on an affidavit of Peter Pantazopoulos of 7 November 2013 verifying the petition; an affidavit of Ben Allen of 2 December 2013 as to search of the Court records; an affidavit of Mark Norman Smith of 15 July 2013 as to service of the Bankruptcy Notice; orders for substituted service of the Creditor’s Petition made on 17 July 2014; affidavits of Jeffrey Steven Mueller sworn on 4 August 2014 and Mark Norman Smith sworn on 28 July 2014 as to service of the Creditor’s Petition and accompanying documents; an affidavit of Faiyaaz Shafiq, solicitor for The Owners – Strata Plan No. 65578, sworn on 17 September 2014 as to the circumstances in which the debt relied on by the petitioning creditor arose; and affidavits of 13 February 2015 of Peter Pantazopoulos as to final debt and of Jeffrey Steven Mueller as to final search (in place of affidavits as to final search and final debt that had been filed before the sequestration order was made).
The Bankruptcy Notice issued on 4 June 2013 claimed Ms Wondal owed The Owners – Strata Plan No.65578 the sum of $5,245.53 based on judgments and orders of the Local Court of New South Wales together with costs and interest, less payments made or credit allowed.
Ms Wondal raised a general issue in relation to whether she had been served with all relevant documents. She disputed service of the Bankruptcy Notice. Mr Smith (a licensed process server) attested to service of the Bankruptcy Notice on Ms Wondal on 13 July 2013 by delivering a copy thereof by leaving it in an envelope marked with Ms Wondal’s name at her Bankstown unit.
Such a method of service is consistent with reg.16.01(1)(c) of the Bankruptcy Regulations 1996 (Cth). Regulation 16.01 applies to the method of service of bankruptcy notices. Personal service is not required if one of the prescribed methods is used (see Skalkos v T & S Recoveries Pty Ltd (2004) 141 FCR 107; [2004] FCAFC 321).
Insofar as Ms Wondal appeared to claim that she had not received the Bankruptcy Notice, there is no evidence to that effect and, in any event, what is in issue is whether there was service in accordance with reg.16.01(1)(c) (see reg.16.01(2) and Skalkos v T & S Recoveries Pty Ltd). It has not been established that there was a failure to serve the Bankruptcy Notice in accordance with reg.16.01(1)(c). I am satisfied on Mr Smith’s unchallenged evidence that service of the Bankruptcy Notice was in accordance with the requirements of reg.16.01(1)(c) of the Bankruptcy Regulations.
No issue was taken in relation to the form or content of the Bankruptcy Notice, except insofar as Ms Wondal disputed the debt on which the Bankruptcy Notice was based. First, she asserted that there was only one judgment in favour of the Respondent. Secondly (relevant to s.52(1)(c)) she denied that she owed any “levy money” to the Respondent.
As to the first of these issues, the debt of $5,245.53 relied on in the Bankruptcy Notice consisted of an amount of $5,923.76 “as per” attached judgments of the Local Court of NSW of 30 May 2012 (for $2,406.82) and of 11 January 2013 (for $3,516.94) as well as legal costs and interest, less payments made or credit allowed.
Ms Wondal contended generally that there was only one judgment against her. However, consistent with the documents attached to the Bankruptcy Notice, Mr Shafiq explained in his affidavit of 17 September 2014 the circumstances in which the debts relied on arose. Mr Shafiq’s evidence is that the debts relied on to found the Petition reflect the Bankruptcy Notice and the contributions due and payable by Ms Wondal as the owner of Lot 28 in Strata Plan No. 65578 to the petitioning creditor’s Administration Fund and Sinking Fund together with interest and expenses incurred in recovering contributions and also costs orders made against Ms Wondal.
I accept that, as attested to by Mr Shafiq, the Respondent commenced legal proceedings against Ms Wondal in Kogarah Local Court on 9 November 2011. Ms Wondal eventually filed a defence. However it was struck out after she failed to appear at a pre-trial review. On 30 May 2012 judgment was given in favour of The Owners for the sum of $2,406.82 inclusive of costs. This is the first of the judgments that formed the basis for the Bankruptcy Notice.
Subsequently, after Ms Wondal had failed to answer an examination notice, the Respondent obtained an examination order in the Local Court. On 4 October 2012 Ms Wondal appeared to answer the examination order. According to Mr Shafiq, she refused to cooperate. In any event, she was ordered to pay The Owners’ costs of $278.30 and the matter was adjourned to enable her to obtain legal advice. The examination was further adjourned on 8 November 2012 on which day, according to Mr Shafiq, Ms Wondal again failed to cooperate in the examination. She was ordered to pay costs of $130. The examination came back before the Local Court on 6 December 2012. It was further adjourned so that Ms Wondal could obtain legal advice or provide documents and answer questions as directed under the examination order. She was ordered to pay costs of $180. On 24 January 2013 the examination was again adjourned and Ms Wondal was ordered to pay costs of $278.30. On 21 March 2013 Ms Wondal refused to be examined. The Owners agreed the examination should be deemed finalised subject to costs and Ms Wondal was ordered to pay costs of $287.10. These costs orders were also relied on in the Bankruptcy Notice.
Meanwhile, on 9 November 2012 The Owners had commenced a second set of proceedings in the Local Court to recover further levies, interest and costs which, it was claimed, had become due and payable by Ms Wondal. On 11 January 2013 the Local Court ordered Ms Wondal to pay The Owners the sum of $3,516.94 inclusive of costs in those proceedings. This was the second judgment that formed the basis for the Bankruptcy notice.
On 22 April 2013 Ms Wondal filed a notice of motion seeking review of the decision in the first Local Court proceedings. The notice of motion was “refused/dismissed” on 26 April 2013 on the basis that it was filed out of time. The affidavit filed in support of the notice of motion bears a close resemblance to the affidavit Ms Wondal filed in this Court on 3 September 2014.
In the Bankruptcy Notice, Creditor’s Petition and affidavits of debt filed during these proceedings, the Respondent has acknowledged that Ms Wondal has made some payments. In evidence before the Court are copies of extracts from the owner ledger in respect of Ms Wondal’s liability to the Owners of the Strata Plan at various times. These reflect payments made by Ms Wondal. The evidence of Peter Pantazopoulos, Strata Manager, in an affidavit of final debt of 13 February 2015 is that the debt of $8,941.36 that was the debt relied on in the creditor’s Petition, was still due and unsatisfied to the extent of $6,781.84. It was acknowledged that the amount of $2,159.52 had been received from Ms Wondal towards payment of this debt.
Insofar as Ms Wondal disputes the existence of the judgments forming the basis for the debt relied on in the Bankruptcy Notice such contention is not made out.
Ms Wondal also raised an issue as to whether she presently owed any money to the Respondent. Before considering this issue I note that it is not in dispute that Ms Wondal failed to comply with the Bankruptcy Notice. The date of the act of bankruptcy was 5 August 2013. The Creditor’s Petition was presented on 2 December 2013. This was within six months of the date of the act of bankruptcy. As indicated, the petition relied on a debt of $8,941.36. It was supported by the requisite affidavits.
Insofar as Ms Wondal disputed service of the Creditor’s Petition, on 17 July 2014 a Registrar of this Court made orders for substituted service which required service of the Petition and accompanying documents by three methods as specified in the orders:
·By handing them to a person apparently over the age of 16 years or leaving them in the letter box or affixed to the front door in a sealed envelope addressed to Ms Wondal at her Bankstown address; and
·By sending them by pre-paid post to Ms Wondal at her Bankstown address and also a Chullora Post Office Box; and
·By sending a text message containing specified details to Ms Wondal.
The orders provided that the Creditor’s Petition should be deemed to be served on Ms Wondal seven days after compliance with the last of these three requirements.
Mr Smith attested to service by leaving the documents in an envelope addressed to Ms Wondal at her Bankstown unit on 27 July 2014 in accordance with the first method specified. Mr Mueller attested to service by post in accordance with the second method and to sending a text message to Ms Wondal on 29 July 2014 containing the information specified.
I am satisfied that the Creditor’s Petition and the necessary accompanying documents were served on Ms Wondal in accordance with each of the three methods provided for in the orders for substituted service. Service was effected at least 5 days before the first hearing date of 20 August 2014 (at which Ms Wondal appeared).
No issue was taken in relation to the form or content of the creditor’s Petition (except insofar as Ms Wondal disputed her liability for any debt due to The Owners).
The main issue raised by Ms Wondal relates to whether the debt on which the petition is based is still owing.
According to the Creditor’s Petition, the debt of $8,941.36 that formed the basis for the petition consisted first of the amount Ms Wondal was ordered to pay in respect of contributions from 1 September 2010 to 1 September 2012 as the owner of Lot 28 in Strata Plan No.65578 to The Owners’ Administration Fund and Sinking Fund levied by The Owners in accordance with s.78 of the Strata Schemes Management Act 1996 (NSW) (the SSMA) together with interest pursuant to s.79 and expenses in recovering contributions pursuant to s.80(1) of the SSMA. The amount said to be due for this period was calculated as the total of the amounts ordered to be paid under the two Local Court judgments (with interest) and under the five costs orders, less the sum of $3,119.64 received from Ms Wondal (a balance of $4,165.77).
In addition, the petition relied on a debt of a further $4775.59, being contributions from 1 December 2012 to 1 June 2013 to the Administration Fund and Sinking Fund, interest and expenses pursuant to ss.78, 79 and 80 of the SSMA. The most recent affidavit of final debt acknowledges that a further $2,159.52 has been received from Ms Wondal, reducing the total amount due to $6,781.84.
Ms Wondal claims, in essence, that she does not owe the levy money claimed. Thus, in her notice of opposition (and in her application for review) she claimed she did not owe any money claimed by The Owners.
In her affidavit of 15 August 2014 Ms Wondal claimed she had paid her levies “up to date”. In particular, she claimed she paid levies from 2009 to 2014. She took issue with the fact that in 2006 she had (as shown in an Owner Ledger for 2004 to 2008) been charged a fee in relation to her failure to provide access for pest control and since that time charged amounts in relation to arrears and reminder notices and interest (in addition to the standard levies which she claimed she paid, albeit not always on time).
In her affidavit of 3 September 2014 Ms Wondal repeated these claims and provided references to cheque numbers, bank statements and copies of cheques in support of her claim that she paid her levies up to 1 December 2012. She claimed that the fee she was charged for failing to provide access for pest control was “illegal” and that that fee and subsequent charges were the basis for the debt relied on in the Creditor’s Petition.
Ms Wondal’s affidavit filed on 17 September 2014 is the same as that of 3 September 2014, except that she claims she paid her levies up to 2 June 2014.
In support of her review application, Ms Wondal filed an affidavit of 12 November 2014 in which she again claimed she “did not owe levy money claimed” and that she had “paid levy up to date” from 1 September 2009 to 2 June 2014. She suggested that it was “impossible” that with a yearly levy of $2,000 there was a debt in the amount relied on by The Owners. Insofar as the Bankruptcy Notice gave credit for payments by her of $2,039.88 she claimed “I did not pay any, its just make it up”. She repeated her claim about the illegality of being charged a fee for failure to provide access for pest control, suggesting Strata Management “want to kill people not to kill cockroach”.
In her affidavit of 23 January 2015 Ms Wondal repeated her claim she “did not owe levy money” and claimed that it was “just made-up to make [her] Bankrupt”.
In her affidavit of 11 February 2015 Ms Wondal addressed issues relevant to s.52(2)(a) as discussed further below.
Ms Wondal provided no other explanation or evidence in support of her assertion that the imposition of a levy on her for contributions to the Administration Fund or Sinking Fund (or charges in relation to recovery of arrears, interest and enforcement expenses) was “illegal”.
I have nonetheless considered whether the issues Ms Wondal raised in this respect could be seen as an assertion that the Court should go behind the judgments that formed part of the basis for the Bankruptcy Notice and part of the basis for the debt relied on in the Creditor’s Petition. However her contentions are not such as to satisfy me that I should not accept the Local Court judgments and orders as satisfactory proof of the petitioning creditor’s debt in relation to the amounts of such judgments. Substantial reasons have not been given for questioning whether behind those judgments there were, in truth and reality, debts due to the petitioner (see Wren v Mahony (1972) 126 CLR 212; [1972] HCA 5). I note in that respect that Ms Wondal filed a defence and an unsuccessful notice of motion seeking to review the first of the judgments relied upon. Costs orders were also made against Ms Wondal in relation to unsuccessful attempts to complete an examination in the Local Court. This is not a case in which there was no opportunity for Ms Wondal to engage in a trial of any of the issues (notwithstanding that it appears that, ultimately, she did not take up that opportunity in a timely manner). There is no evidence of fraud or collusion (notwithstanding unsubstantiated claims by Ms Wondal disputing her liability). There is no reason to doubt that the judgments were founded on real debts.
Ms Wondal’s evidence of her payment of the basic levy amounts is not fresh evidence such as to provide a basis on which the Court should inquire into the validity of the judgments in question. Ms Wondal has not established that there are substantial reasons for doubting whether there is a debt due to The Owners (see Joossé v Commissioner of Taxation (2004) 137 FCR 576; [2004] FCAFC 245). More generally, Ms Wondal’s assertions do not raise substantial doubt about her liability for levies, charges, interest and expenses pursuant to the SSMA.
Nor are Ms Wondal’s claims such as to establish that the Respondent has not established that the debt on which it relies is still owing. In that respect I note that under s.76 of the SSMA the owners corporation is to determine the amounts to be levied as a contribution to the administrative fund and the sinking fund. It “must levy on each person liable for it such a contribution”. If the owners corporation is faced with other expenses it cannot meet from either fund it must levy on each owner a contribution to the Administrative Fund in order to meet the expenses. Section 78 deals with the manner of levying contributions. Section 79 explains when a contribution levied by the owners corporation becomes due and payable and provides for interest on unpaid levies. Section 80(1) provides, relevantly, that:
…an owners corporation may recover 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.
In his affidavit of 17 September 2014 Mr Shafiq provided evidence as to the Local Court proceedings to recover such debt and copies of the owner ledgers in relation to Lot 28 in Strata Plan No. 65578 as at 12 October 2012, 8 November 2012, 6 December 2012, 22 March 2013, 7 August 2013 and 12 November 2013. Mr Shafiq attested that Ms Wondal had not paid the levies, interest and costs in full, although the payments she referred to in her affidavit of 3 September 2014 had been acknowledged by the creditor and were reflected in the owner ledger which was generated electronically and was said to reflect the levies, interest and costs due and payable and payments received.
In addition, Mr Shafiq explained that insofar as Ms Wondal complained that costs incurred in relation to pest control were unnecessary, her failure to co-operate with The Owners in keeping a pest infestation under control and her failure to keep outstanding levies up to date had resulted in The Owners incurring costs for recovery of levies, interest and costs. I accept this evidence.
In his affidavit of final debt Mr Pantozopoulos, a Strata Manager and authorised officer of the Strata Managing Agent of The Owners- Strata Plan No.65578 attested, on the basis of his access to the books and records of The Owners, that the amount of $8941.36 made up as described in the Creditor’s Petition was still due and unsatisfied to the extent of $6,781.84, the amount of $2,159.52 having been received from Ms Wondal.
Consistent with the creditor’s claim as to the amount due, the ledgers (described as Owner Transaction Summaries) attached to Mr Shafiq’s affidavit reveal that while Ms Wondal has paid standard levies (as she claimed) she has not met all arrears and professional costs.
I am satisfied that, taking into account payments that the creditor accepts have been made by Ms Wondal, the debt on which the Respondent relies is still owing to the extent of $6,781.84. The debt owed to the petitioning creditor has exceeded $5,000 at all relevant times (see s.41(1)(b) of the Bankruptcy Act in relation to the Bankruptcy Notice and s.44(1)(a) in relation to the Creditor’s Petition). A fresh affidavit of debt (as well as an affidavit of final search) was filed by the Respondent at the hearing of the review application (see Totev v Sfar).
I am satisfied as to the matters stated in the petition, as to service of the petition and as to the fact that the debt on which the petitioning creditor relies is still owing as required under s.52(1) of the Act.
Section 52(2) of the Bankruptcy Act
I have considered whether, notwithstanding that the prerequisites of s.52(1) are met, Ms Wondal has satisfied me that she is able to pay her debts within s.52(2)(a) of the Act or that for other sufficient cause a sequestration order ought not to be made.
The onus under s.52(2) is on Ms Wondal (see Re Sanders; Knudsen and Yates (t/a The Hargreaves Practice) v Sanders (2003) 1 ABC(NS) 408; [2003] FCA 1079). Ms Wondal contended that she was able to pay her debts. She made this contention on two bases. First she disputed asserted liabilities to various creditors identified by the Trustees. Secondly she claimed that on the information available to her Trustees in Bankruptcy she had gross assets that exceeded her gross liabilities.
It is relevant to outline the evidence before the Court in relation to Ms Wondal’s financial position.
Ms Wondal has not put evidence before the Court as to the full extent of her assets and liabilities. Insofar as she appeared to be of the view that it was for the Trustees or the petitioning creditor to establish her insolvency, as I endeavoured to make clear to her, that is not the case. Ms Wondal has not filed a Statement of Affairs, despite having been requested to do so by the Trustees on more than one occasion. The Trustees conducted preliminary investigations discussed further below. As attested to in the Trustees’ Report, Ms Wondal did attend an interview at the Trustees’ office on 18 December 2014 and responded to correspondence.
On 29 January 2015 the Trustees filed a Trustees Report of 28 January 2015 annexed to an affidavit of Andrew Scott, one of the Trustees. However Mr Scott explained that the bankrupt’s failure to file a Statement of Affairs had hindered his investigations and that he had also experienced difficulties due to conflicting information provided by Ms Wondal and the absence of objective data to determine the accuracy of the information she did provide.
In her affidavits filed prior to the sequestration order Ms Wondal disputed her liability to the petitioning creditor (the only basis of opposition to the petition) but did not provide evidence about her solvency generally. Similarly, in her application for review she took issue with her liability to The Owners and while she claimed she had “money to pay if necessary” did not provide evidence in this respect at that time. She was given the opportunity to file further affidavit evidence. She did provide some limited information in subsequent affidavits.
However as discussed below, Ms Wondal’s failure to provide complete and consistent information is relevant to whether she has met the onus of satisfying the Court that she is able to pay her debts within s.52(2)(a) and to the exercise of the discretion under s.52(2) of the Act.
Assets
In response to an initial letter of 6 November 2014 from the Trustee Ms Wondal claimed relevantly: “please don’t do anything to the property, We already sell that property.” She did not clarify what “property” was allegedly sold. No documentation or information to support this claim was provided.
In her affidavit of 23 January 2015 Ms Wondal claimed she owned a Bankstown unit and an Ashfield unit previously identified by the Trustee (and provided copies of rates notices for each property). She claimed she had “two estate equity worth more than a $ Million”. There is no valuation or documentary evidence to support this claim. Ms Wondal also claimed that her brother was willing to pay $700,000 to buy the Ashfield unit “to cover [her] bankcard debt.”
According to the Trustees Report of 28 January 2015 (and Ms Wondal’s affidavit) she is the sole registered proprietor of two properties, units which are described for convenience as the Bankstown property and the Ashfield property. As at the date of Mr Scott’s report the Trustees had conducted searches to confirm that Ms Wondal was the current registered proprietor of the properties. While mortgages remain registered over each property in favour of Credit Union Australia Limited (CUA), CUA confirmed to Mr Scott that there were no moneys owing to it under the mortgages.
Mr Scott obtained appraisals for these properties from a real estate agent who provided an “indicative market value” for the Bankstown property of $500,000 to $550,000 and for the Ashfield property of $385,000 to $425,000. These were only appraisals. Internal access was not available to the agent.
The Trustees Report proceeded on the basis that the two properties had a total value of $930,000. This is the best evidence of the value of the properties before the Court. Insofar as Ms Wondal asserted, without any supporting evidence, that the two properties were worth more than $1,000,000, this has not been established.
According to Mr Scott, at her interview on 18 December 2014, Ms Wondal claimed she was selling her properties to her brother who owed her monies, but no contracts or other documents in respect of such sale had been prepared. She claimed she retained the Certificates of Title and discharges of the mortgages at a friend’s home.
Mr Scott wrote to the bankrupt’s brother on 6 January 2015 seeking records of payment to and from Ms Wondal and details of any offers to purchase her real property. The only reply was from Ms Wondal, who asserted that she never had any proposals or made any offers of sale in relation to the Bankstown unit, but that part of the Ashfield unit belonged to her “family”. She also claimed she had never obtained finance. No documents were provided in support of these claims.
Contrary to any claim that Ms Wondal’s family owned part of the Ashfield property, in her later affidavit of 11 February 2015 she claimed that sale of one of the two properties was “enough to pay all my debt” on the basis that her brother was willing to pay $700,000 for “my” Ashfield property. There is no documentary evidence or evidence from Ms Wondal’s brother to support this claim. Nor, on the other hand, is there any documentary or other evidence to support any claim that Ms Wondal’s family has any interest in either property.
I note that, according to the Trustees, Ms Wondal was the former registered proprietor of a property at Kingsford which was sold by the mortgagee in possession in September 2009. There was litigation in relation to the sale. The associated costs order in favour of Gadens Lawyers is discussed below. Ms Wondal did disclose in her affidavit of 23 January 2015 that she had previously owned a property at Kingsford. She appeared to suggest that she used it “to cover my looses” (sic) and suggested that “Gadens Lawyers rob it and Supreme Court cover/help them”. She referred to the fact of a Supreme Court case, but did not explain its relevance. It is discussed further below in relation to Ms Wondal’s liabilities.
Based on his investigations, Mr Scott identified bank accounts containing $61,843.30 in Ms Wondal’s name. However Ms Wondal told the Trustee that she held bank accounts in trust for her grandchildren. Such a claim is consistent with the account names provided to the Trustee by the Bank of Queensland in relation to six accounts. The Trustee’s investigation revealed eight other bank accounts in Ms Wondal’s name containing a total of a little over $300. In the absence of documents to determine legal or beneficial ownership of such funds, the Trustee prepared his report on the basis that no funds in the bank accounts would be divisible property in a bankruptcy. For present purposes it would also seem appropriate to disregard the accounts said to be held in trust for other persons in considering Ms Wondal’s ability to pay her debts, notwithstanding that in her affidavit of 11 February 2015 she appeared to suggest that the net surplus of assets over liabilities calculated by the Trustee should take into account (as part of her assets) the total of $61,843.30 in all those bank accounts identified by the Trustee.
Ms Wondal is said to have told the Trustee that she did not own a motor vehicle or any shares. She has not disclosed any other assets in these proceedings.
On the limited and inconsistent information presently before the Court the Trustees’ assessment of Ms Wondal’s realisable assets at $930,000 is the best evidence as to her assets.
Income
It is not possible on the available information to be satisfied as to whether Ms Wondal earns an income of any significance and, if so, how much.
Mr Scott recorded that Ms Wondal advised in her December 2014 interview that her only income was rent derived from the Ashfield property which was paid into her son’s account, that she had not lodged any income tax returns or earned any income in the last 25 years, and that while she had assisted at her brother’s health food factory, she had not received any income from doing so and was currently in dispute regarding moneys said to be owed to her.
Subsequently, in an email of 16 January 2015 she informed the Trustee that, as she later claimed in her affidavit of 23 January 2015, she had been employed by her brother, a health foods manufacturer, “on and off” since the year 1980, that he had promised to be the guarantor for her debt, and that her mother and father always gave her money. In her affidavit she claimed her parents had died.
The Trustees’ investigations revealed that the Ashfield unit was tenanted. A person assumed to be the tenant advised the Trustees (in response to a request that rent be paid to the Trustee and for details of the amounts paid and to whom) that the owner had stated that if they did not continue to pay the rent to “A Vondal (sic) account” she would “kick [them] out”. No information has been provided to the Court by Ms Wondal as to the amount of any rental or other income received by her. Ms Wondal did not address her income in her affidavit of 11 February 2015, except insofar as she claimed she received only “little income”.
In contrast, evidence obtained by the Trustees reveals that in credit card and loan application forms Ms Wondal had indicated in the past that she was in employment and in receipt of a relatively substantial income. In January 2002 in a St George Bank credit card application form she claimed to have a net income of $1,700 a week as a sales manager with “Sydney S.W” and that she had worked there “5 Y”. In a Citibank personal loan offer form of May 2008 she was said to be in full-time employment as a sales manager with Nutrisoy Pty Ltd (the company she claimed was owned by her brother) earning $180,000 a year. In September 2010 she claimed in a Westpac personal loan application form that she was earning $6,801 a month net as a full-time “manager/supervisor” in a “restaurant/CAT” and that her employer was Nutrisoy.
As Mr Scott pointed out in his report, in the event that Ms Wondal was employed and deriving income at such levels she may well have incurred liabilities to the Australian Tax Office (ATO) that cannot be quantified at present. According to information provided to the Trustees she has not lodged any income tax returns at least since 2001.
On the evidence before the Court I cannot be satisfied that Ms Wondal has available to her any income to be taken into account in determining whether she is able to pay her debts within s.52(2)(a) of the Act.
Liabilities
Ms Wondal volunteered only limited details about her liabilities in her affidavit of 23 January 2015. She claimed her brother was willing to pay $700,000 to buy the Ashfield unit “to cover [her] Bankcard debt”.
The debt relied on by The Owners is considered above.
Mr Scott identified a number of unsecured creditors. Ms Wondal has not, despite a number of requests, filed a Statement of Affairs. Nor has she provided the Court with full details of her creditors. She did attend an interview at the office of the Trustees on 18 December 2014 in which she acknowledged and accepted that she had creditors to whom she owed over $400,000. It appears that this acceptance was in relation to information that has been obtained by the Trustee from the lenders.
According to the Trustees’ Report, their investigations have revealed that Ms Wondal owes HSBC Bank $29,656, Credit Corp Services $139,490, ACM Group $114,353, Citibank $161,690, Lion Finance $26,657, ANZ Bank $28,887 and National Australia Bank $5,242.
Ms Wondal claimed in her affidavit of 23 January 2015 that she had “lots of bank credit cards” (but did not identify them all), that she paid 20% interest and that the bank always topped up her credit limit. She claimed she did not realise she had used so much “credit card money and pay 20% interest so many years in the past”. She asserted that the “bank” had offered her a 50% discount to settle her debt and that she would “negotiate and consolidate that debt”.
This may be a reference to the fact that (as evidenced by a letter Ms Wondal tendered on 16 March 2015) on 13 November 2014 Citibank offered her the opportunity to finalise an account in which $7,680.89 was outstanding for $3,840.45, provided she did so by 28 November 2014. Ms Wondal was bankrupt at that time. It appears from information provided to the Trustees by Citibank that this was only one of four debts to Citibank totalling $161,690. As discussed further below a similar offer (made before Ms Wondal became a bankrupt) in relation to a debt owed to ACM Group was not taken up by Ms Wondal.
Indicative of the inadequacy of Ms Wondal’s disclosure of her financial situation, she attached to her affidavit of 23 January 2015 what she described as “Bank statement for my credit card debt” and claimed this indicated:
Westpac Sale Of Debt credit for $3674.46 and $6867.12
ACM Group add-up lots more, take profit for it
I did not owe money or take finance from ACM Group
Attached were March 2013 statements for two Westpac credit cards. However, contrary to Ms Wondal’s assertion, these statements show “sale of debt credits” for amounts totalling $47,406.02 as at 6 March 2013 considerably more than the amounts referred to by Ms Wondal.
Ms Wondal also attached what appeared to be an extract from a proof of debt form completed by ACM Group dated 29 October 2014 in the amount of $114,353.49.
It is apparent from the Trustees’ Report that this relates to a debt of $144,353.40 claimed by ACM Group (a supporting creditor) which purchased debts from Westpac (consisting of the two credit card debts disclosed by Ms Wondal and also a personal loan debt not referred to by Ms Wondal) in 2013 on which, unsurprisingly, interest continued to accrue. ACM Group has obtained judgment against Ms Wondal in respect of part of the debt. The amount claimed also includes legal costs. ACM Group provided full details of these debts and copies of assignment letters to the Trustees.
The petitioning creditor in these proceedings relied on an affidavit of debt sworn by Trent Vieira, Director of Operations at ACM Group Limited on 28 November 2014. Mr Vieira attested that ACM Group had purchased debts from Westpac. He acknowledged that ACM Group made a settlement offer to Ms Wondal in August 2014 in relation to the debts assigned to it by Westpac (at that stage a total of $107,528.22). ACM Group pointed out to her that she may otherwise incur additional interest and legal costs. ACM Group obtained judgment in the amount of $60,981.13 against Ms Wondal in Local Court proceedings on 3 September 2014. According to Mr Vieira, Ms Wondal also owed ACM Group a further debt of $49,044.91 in relation to a personal loan she obtained from Westpac and interest thereon. The total debt was said to be $114,353.40 including interest and legal costs.
Ms Wondal disputed her liability to ACM Group. However, contrary to her assertion, the fact of the assignment of Westpac debts to ACM Group does not mean that Ms Wondal does not owe such debts. She did not assert any basis for a challenge to the validity of the assignment. Her general contentions in that respect are not such to satisfy me that the debt to ACM Group identified by the Trustees on the basis of their investigations to date (and in the absence of a Statement of Affairs from Ms Wondal) should not be taken into account in considering whether she has satisfied the Court that she is able to pay her debts.
Insofar as Ms Wondal disputed the amount of the debt owed to ACM Group on the basis that it exceeded the amount referred to in the Westpac statement or because it has increased over time, she provided no up-to-date evidence in that respect. The Westpac statements related only to credit card debts and referred to a greater amount than Ms Wondal suggested. The increase in the total debt (which includes a personal loan) is consistent with the imposition of interest and enforcement costs (including in relation to the judgment obtained by ACM Group). Ms Wondal’s generally expressed concerns do not satisfy me that she does not have such indebtness to for the purposes of considering s.52(2)(a) of the Act.
Insofar as Ms Wondal claimed that she did not (or should not) owe money to ACM Group (or to any other credit card or loan provider) for unpaid interest – apparently on the basis that she had made minimum monthly repayments, such claims do not satisfy me that this debt (or the other credit card or loan debts identified by the Trustees) should not be taken into account under s.52(2)(a) of the Act.
I also note that Ms Wondal did not take up ACM’s discount settlement offer. She was not bankrupt at the time. Her assertions about her ability to pay “discounted” debts do not support any claim that she is able to pay her debts within s.52(2)(a) of the Act.
Gadens Lawyers Pty Ltd (Gadens) also appeared as a supporting creditor and filed an affidavit sworn by Mathew Kaufman on 16 February 2015 (relied on by The Owners) attesting to the fact that $28,138.69 remained owing by Ms Wondal to Gadens under a judgment of the Supreme Court of NSW of 6 September 2012. Ms Wondal did refer to Gadens in her affidavit of the 23 January 2015 in relation to proceedings concerning the Kingsford property she previously owned, but did not disclose any indebtedness to Gadens.
According to information provided to the Trustees, the debt claimed by Gadens represents a costs order against Ms Wondal in relation to legal proceedings concerning the mortgagee sale of the Kingsford property. Gadens acted for the mortgagee, ING Bank (Australia) Ltd (ING). Ms Wondal unsuccessfully challenged the sale. Her application was summarily dismissed. She unsuccessfully sought leave to appeal to the NSW Court of Appeal (see Wondal v ING Bank (Australia) Ltd [2013] NSWCA 286). She was ordered to pay costs.
However in her affidavit of 11 February 2015 Ms Wondal asserted that ING was the mortgagee and that Gadens owed her money in relation to the price for which the Kingsford property was sold (in circumstances where Gadens acted for ING on the sale). Such arguments appear to reflect concerns Ms Wondal unsuccessfully asserted in her application for leave to appeal in relation to her claim against ING and Gadens seeking damages of $35 million (see Wondal v ING Bank (Aust) Ltd at [10]).
Ms Wondal’s assertions that she does not owe money to Gadens and that they owe money to her do not satisfy me that this debt should be disregarded for the purposes of determining whether I am satisfied by Ms Wondal that she is able to pay her debts within the meaning of s.52(2)(a) of the Act.
In her affidavit of 11 February 2015 Ms Wondal also appeared to dispute other debts to Lion Finance (assigned from BankWest) and Credit Corp Service (assigned from NAB and St George) on the basis that these debts had been assigned and that she had made minimum monthly repayments in respect of her credit card debts.
As indicated, as a matter of principle the fact that a creditor claims as an assignee of a debt does not mean that the debt is not owed by the debtor (as Ms Wondal appears to assert). In any event, she does not dispute that she has the credit card or personal loan debts the subject of asserted assignment to Lion Finance, Credit Corp Services or, except as discussed above, ACM Group. Given that, in this context it is appropriate to have regard to the amount of her indebtedness in respect of such debts in considering s.52(2)(a).
In addition, if Ms Wondal has in the past earned income in the amounts claimed in credit card and loan applications as outlined above, she may well have income tax liabilities that cannot presently be quantified.
Finally, I note that in the absence of full disclosure by Ms Wondal I cannot be satisfied that the debts so far identified by the Trustees in fact constitute the full extent of Ms Wondal’s liabilities.
Whether Ms Wondal has established that she is able to pay her debts
Notwithstanding Ms Wondal’s failure to provide complete and consistent evidence about her financial position, I have considered such evidence as there is before me in the context of s.52(2)(a) of the Act. On the basis of the information obtained by the Trustee at this stage Ms Wondal’s known assets (the two properties) exceed in value the total amount of debts identified by the Trustee. Ms Wondal argues that on this basis alone she should not be bankrupt.
On the evidence before the Court, it is apparent that Ms Wondal is the registered proprietor of two units (although she has made various claims as to whether other members of her family have an interest in such property) with a value (on the information obtained by the Trustee) in the order of $930,000 and that she has known unsecured creditors in the order of $544,282. While these are only preliminary figures based on the Trustees’ investigations (in the absence of a Statement of Affairs) these figures indicate that, allowing for the additional payments towards the debt of The Owners reflected in the most recent affidavit of debt and subject to there being no other substantial creditors, there would be a net surplus before priority payments (such as liabilities in relation to the administration of the bankrupt estate) of approximately $385,000.
Ms Wondal’s contention is that as she has assets that exceed her liabilities, she should not be bankrupt. She also asserted that she sale of one of her units would suffice to meet the debts that she accepted. To the extent that she made this submission on the basis that she did not accept all the debts identified by the Trustees, she has not established that it is inappropriate to take into account the debts identified by the Trustees. In the alternative, she put such a submission on the basis of all the assets and liabilities discovered by the Trustees.
Ms Wondal bears the burden of establishing that she is able to pay her debts within the meaning of s.52(2)(a) of the Act. Clearly a debtor who is in a position to pay all the debts that she owes within a reasonable period ought not to be subject to a sequestration order. There is authority to suggest that this does not necessarily require the debtor to have sufficient cash at hand or available on deposit to pay all creditors, provided he or she has other realisable assets (Sandell v Porter and Another (1966) 115 CLR 666 at 670; [1966] HCA 28). Moreover, the mere fact that a person might be described as a “recalcitrant debtor” is not of itself such as to warrant bankruptcy (see Re Sanders at [23]). However, such a person will have to establish solvency in the sense specified in s.52(2)(a), that is, that she has the “ability to pay [her] debts, as and when they become due and payable” in the “reasonably immediate future” (Re Sanders at [26] and cases cited therein).
In considering whether a person is able to pay her debts for the purposes of s.52(2)(a), it is not sufficient for a debtor merely to establish that her assets exceed her liabilities in value (Eykamp v Deputy Commissioner of Taxation (2010) 8 ABC(NS) 105; [2010] FCA 797 at [5]). The debtor must establish that her assets are “available to be realised and capable of ready realisation” (see Bennett J in Re Sanders at [22]). In this context it is relevant to have regard to the debtor’s financial position “in its entirety” (Sandell v Porter at 670). I have borne in mind that as pointed out in Sandell v Porter at 671 “generally speaking [a conclusion of insolvency] ought not to be drawn simply from evidence of a temporary lack of liquidity”.
However, as Buchanan J stated in Eykamp at [7]:
Under an earlier definition in the [Bankruptcy] Act considered in Sandell v Porter (1966) 115 CLR 666 it was necessary for a debtor to be able to pay debts as they fell due out of the debtor’s own money. Such monies extended to those capable of being procured by sale, by mortgage or pledge of assets of the debtor’s within a relatively short time. A more flexible position now obtains. I note that in International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 Katz J favoured the view that the necessity to pay a debt from a person’s own money continued to be an important element in the scheme established under the Act (see e.g. s 124(3)(a) of the Act). However, with respect, so far as it concerns consideration of whether a person is, or is not, solvent, I prefer the view taken by Palmer J in Lewis v Doran [2004] NSWSC 608; (2004) 184 FLR 454 at [116] (see on appeal Lewis v Doran [2005] NSWCA 243; (2005) 219 ALR 555 at [109] – [112]) to which I subscribed, with the agreement of Marshall and Tracey JJ, in Whitton at [34] – [38]. Accordingly it would not be impermissible to pay regard to the fact that Mrs Eykamp could raise sufficient money to pay the debt, whether or not that was the direct result of sale, mortgage or pledge of her assets. However, whatever mechanism is employed to secure the necessary funds, and satisfy the Court that it provides adequate evidence of solvency, it remains necessary that it produce results within a realistic frame time (Sandell v Porter at 670, Hall v Poolman [2007] NSWSC 1330; 65 ACSR 123 at [187]). (Emphasis added).
Thus, in considering whether Ms Wondal has established that she is able to pay her debts, including debts that would fall due in the reasonably immediate future, it is relevant to have regard to her income and assets and also to any prospect that she can obtain funds by realisation of assets by sale, mortgage or pledge within a relatively short time, relative to the nature and amount of the debts and to the circumstances.
In this case the debts that have been identified by the Trustees are of some significance, being over $544,242. It is the case that Ms Wondal had, based on the Trustees’ calculations, an estimated net asset surplus of over $385,000 before any priority payments (which the Trustee estimated at the time of his report at over $56,000), although no provision was made in such calculations for any potential liability to the ATO or any other, as yet undisclosed liabilities.
The mere fact of an excess of assets over liabilities is not of itself such as to satisfy the requirement that the debtor (or bankrupt) can procure moneys within a relatively short or reasonable time such as to enable her to meet her debts. As Buchanan J pointed out in Eykamp (at [5]):
…establishing solvency involves more than a mechanical comparison between the extent of the liability upon which a creditor relies and the apparent value of assets possessed by a debtor, should they be able to be realised.
Ms Wondal has not disclosed assets other than the two properties (and bank accounts said to be held in trust) or any significant income. It is apparent that payment of her debts could only be achieved by an immediate sale or refinancing of real property. A valuation of property of itself is not evidence that the property is capable of being sold within the reasonably immediate future or a relatively short time.
On her evidence it is not clear whether other members of her family may have an interest in at least one of the properties. Ms Wondal disputes that it would be necessary to sell both the properties in order to discharge all debts. The appraisal evidence is merely indicative of value. Ms Wondal’s claims about the value of these properties were not substantiated. However, when regard is had to the extent of her liabilities as estimated by the Trustee, it is likely that it would be necessary to sell both properties immediately in order to discharge all Ms Wondal’s debts, as due to the extent of her indebtedness, the sale of one property would likely not be sufficient to repay all of her debts.
Ms Wondal’s contention in this respect may reflect her assertion in her affidavits of 23 January 2015 and 11 February 2015 that her brother was willing to buy her Ashfield unit for $700,000 “to cover my bank card debt”. This assertion seems to be contrary to Ms Wondal’s claim to the Trustee that she was in dispute with her brother over his failure to pay her for the work she allegedly did for him in his company. In any event, by letter of 6 January 2015 the Trustee requested the bankrupt’s brother to provide records of any moneys paid to and/or received from Ms Wondal in the last four years as well as details of any offers made to purchase the real properties owned by her. No response was received from the brother. Instead, at that point Ms Wondal advised the Trustee that part of the Ashfield property belonged to her family, that she was employed by her brother and that her parents, provided her with money. She did not provide any documents, either to the Trustee or to the Court, to support her assertions in relation to her brother’s claimed willingness to purchase the Ashfield property, let alone a willingness to purchase it for $700,000. Neither she nor her brother provided details to the Trustee of any current or previous proposals to sell the properties, despite the Trustee’s request that they do so. I am not satisfied on the evidence before the Court that Ms Wondal could sell one of her properties to her brother, let alone that she could do so within a reasonable time frame or for $700,000.
Nor is there any evidence before the Court to suggest that Ms Wondal is or was willing or had taken any steps whatsoever to sell either or both of her properties or that she could have done so within a relatively short time to enable her to pay her debts. The Trustee obtained a report from an independent property agent which revealed that Ms Wondal had never listed either of the properties for sale with a licensed real estate agent.
Ms Wondal has not provided any evidence of her ability to obtain refinancing. Nor has she proposed this course of action. On the contrary. She advised the Trustee that she had attempted to consolidate her debts (consistent with her affidavit evidence) and obtain refinance, but that she was unsuccessful given the size of her existing debts and her credit rating and as she earns no income. Consistent with this evidence, her credit file held with Veda Advantage Information Services and Solutions Limited indicates 12 consumer payment defaults by Ms Wondal since 22 October 2011 (10 in relation to credit cards and two in relation to personal loans) and a number of consumer credit enquiries in relation to personal loans and real property mortgages since 5 August 2010 (as well as for credit cards).
It is also relevant in relation to any prospect of refinancing that, on her own account, Ms Wondal has not filed tax returns (at least since 2001) and says that she is not in receipt of any income (apart from the rent paid by the tenant of the Ashfield property to her son’s account). On the material before the Court, I am not satisfied that Ms Wondal has established any reasonable prospect of refinancing within a reasonable time.
It is necessary to be satisfied that Ms Wondal is able to realise assets sufficient to pay her debt within a realistic time frame (see Eykamp at [7]) or that she be able to procure, by realisation by sale or mortgage or pledge of her assets within such a relatively short time, sufficient money to do so. On the basis of the evidence before me, and bearing in mind the lack of objective supporting material from Ms Wondal, there is nothing to satisfy the Court that Ms Wondal has been willing or able to sell or obtain finance secured on either or both of the properties (including what appears to be her home) within a relatively short time such as to enable her to pay all her debts.
In addition to considering the balance sheet test of a comparison of Ms Wondal’s assets and liabilities, I have also had regard to the evidence as to what, if any, cash flow would become available within a reasonably short time to enable her to pay her debts. The evidence obtained by the Trustees in relation to Ms Wondal’s creditors indicates that the majority of her debts are long overdue. Her credit history reveals up to 12 payment defaults, the majority of which were reported through 2012. The Trustee’s inquiries of various creditors reveal that Ms Wondal has been making minimal payments which are insufficient to cover ongoing interest charged on such debts.
A distinction is to be drawn between a debtor who is able to satisfy the Court that she is able to pay her debts within s.52(2)(a) of the Act and a debtor who may be able to pay her debts at some more distant future time (see Re Noye; Ex parte Deputy Federal Commissioner of Taxation (1956) 18 ABC 77 at 78 and Quitlong v ACM Group Limited [2011] FMCA 688 at [28] – [31]). In that respect I note that Ms Wondal contemplated that if she were not bankrupt she would pay off her creditors one by one and that each creditor would accept an amount less than the debt (given past offers in this respect). Such claims do not satisfy me that Ms Wondal was able to pay her debts at the time of the sequestration order or at the time of this review (see Krpina v Arrow Sun Australia Pty Ltd [2015] FCA 63 at [82]). I note her failure to do so in relation to the debt to ACM Group. Ms Wondal had provided only limited evidence as to her current financial situation. It is not such as to enable me to be satisfied that she was or is unwilling, rather than unable, to pay her debts as and when they fall due.
Given that Ms Wondal appears to have no more than minimal funds in her bank accounts (apart from funds held on trust for her grandchildren) and the absence of evidence as to her income, she has not established that she has funds available to pay her outstanding liabilities.
In short, while on a balance sheet test (on the information discovered by the Trustees) Ms Wondal has a surplus of assets, on the evidence before the Court it is unlikely that (either at the time of the sequestration order or this review) she would be able to refinance or sell her real property within a relatively short period of time to meet debts that were and are long overdue and she has not established that she has income or other funds to pay her debts within a relatively short period of time.
On the evidence before the Court and bearing in mind the limited and incomplete evidence from Ms Wondal in relation to her assets, liabilities, income and outgoings, the inconsistency in accounts she has provided to the Trustee, the absence of taxation returns and the age of her identified debts, the evidence is not such as to enable me to be satisfied that she is able to pay her debts within s.52(2)(a) of the Act either within the immediate future or within a realistic timeframe. Ms Wondal has not satisfied me that she is able to pay her debts within s.52(2)(a) of the Bankruptcy Act.
I note in any event that the Court has a discretion under s.52(2) as to whether or not to dismiss a petition, which is also relevant in the conduct of a review of a sequestration order as a hearing de novo. In this case, the absence of full disclosure of her financial situation by Ms Wondal and the inconsistencies in the information before the Court would tell against the exercise of the discretion.
Section 52(2)(b) of the Bankruptcy Act
I am not satisfied that the issues raised by Ms Wondal, including the fact that she disputes the debts (as discussed above) and takes issue with the motivations of the petitioning creditor, other creditors and the Trustees or any other matters raised are such as to amount to other sufficient cause within s.52(2)(b) of the Act.
Ms Wondal appeared to raise a concern that she was being discriminated against on the basis of age or that some other unfairness was implicit in the actions that had been taken against her. There is nothing in the evidence before the Court to support any such contention.
Insofar as Ms Wondal’s concern appeared to be directed at the actions of her Trustees in Bankruptcy on the basis that she did not accept that she was bankrupt, she is bankrupt. There is no probative evidence to support any claim that the Trustees have acted inappropriately in the initial steps taken in the administration of her estate. In any event it is difficult to see how such concerns would enliven s.52(2)(b) of the Act (see Krpina at [47] and [51]). Ms Wondal’s unsubstantiated assertions about the motivation for the actions of the Trustees and/or the petitioning creditor are not such as to establish sufficient cause within s.52(2)(b) of the Act.
Ms Wondal also expressed concern about her reputation. It is the case that if her bankruptcy remains on foot it is likely to result in the sale of her properties in order to meet her indebtedness. However, as pointed out by the solicitor for the Trustees, if sufficient funds are ultimately available to meet Ms Wondal’s debts (as eventually calculated), her bankruptcy could subsequently be annulled under s.153A of the Act.
She has not satisfied me that for other sufficient cause a sequestration order ought not to be made. In all the circumstances, I am not persuaded that the sequestration order should be set aside.
For the sake of completeness, I note that (while there was no suggestion to this effect), I am not satisfied that this is a case in which the bankruptcy should be annulled under s.153B of the Act (see Pattison v Hadjimouratis (2006) 155 FCR 226; [2006] FCAFC 153). I am not satisfied that the sequestration order ought not to have been made, having regard to such evidence as there is before the Court in relation to Ms Wondal’s financial situation as discussed above. I have also had regard to the fact that Ms Wondal has not provided all relevant material in relation to her financial position so that the Court may be properly informed and can make a judgement based on the full facts and circumstances (see Re Papps; Ex parte Tapp (1997) 78 FCR 524; [1997] FCA 1031).
The application for review of the sequestration order should be dismissed and the Registrar’s orders affirmed.
I certify that the preceding one hundred and thirty-one (131) paragraphs are a true copy of the reasons for judgment of Judge Barnes
Associate:
Date: 31 March 2015
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