Ziade v Combe - [2002] FMCA 232

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ZIADE v COMBE

[2002] FMCA 232

BANKRUPTCY – Application for sequestration order – sequestration order opposed on grounds that petitioning creditor was preventing a proper investigation of debtor’s allegations that he had already paid himself – sequestration order opposed on grounds that debtor is solvent – sequestration order made.

Bankruptcy Act 1966 (Cth) s.52

Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572

Applicant:

ANTHONY ZIADE

Respondent:

FAYE DIANE COMBE

File No:

SZ 535 of 2002

Delivered on:

15 October 2002

Delivered at:

Sydney

Hearing Date:

29 August 2002

Judgment of:

Raphael FM

REPRESENTATION

Counsel for the Applicant:

Mr B Skinner

Solicitors for the Applicant:

Anthony Ziade & Associates

For the Respondent:

Respondent in person

ORDERS

Application for sequestration order allowed.
Applicant creditor’s costs be taxed in accordance with the Federal Court Rules and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 535 of 2002

ANTHONY ZIADE

Applicant

And

FAYE DIANE COMBE

Respondent

REASONS FOR JUDGMENT

This application for a sequestration order against the debtor is the culmination of a dispute between the creditor, a solicitor, and the debtor, a former client, that dates back to approximately 1990. The creditor performed legal services for the debtor in a personal capacity and in her capacity as administrator of her late father’s estate. The amounts claimed in the bankruptcy petition and in the bankruptcy notice which preceded it relate to costs claimed by the creditor. These bills of costs have all been the subject of proceedings either in the District Court of New South Wales or the Local Court.
The judgment in the District Court upon which the bankruptcy notice was based was a judgment of Hosking DCJ in the sum of $76,308.00 dated 14 November 2000. This judgment followed the re-hearing of an arbitration on the same issues in which an award had been given on

12 February 1999. The debtor filed a cross-claim against the creditor which was heard by Gibson DCJ and dismissed on 30 May 2001 after a contested hearing lasting several days.
The debtor did not appeal the judgment of Hosking DCJ within the normal time specified but did so (on the calculation of the creditor’s counsel) some 511 days out of time. At the same time she appealed against the decision of Gibson DCJ on the cross-claim. That appeal was approximately 321 days out of time. Leave to appeal out of time is required. This leave was applied for on 7 May 2002 and the application was heard on 9 September 2002.
In the meantime the debtor sought before the Federal Court to set aside the bankruptcy notice. This application was adjourned on several occasions and eventually heard by Gyles J who dismissed it. The grounds for setting aside the application were similar to those advanced by the debtor in relation to these proceedings, namely that the debt had been paid and alternatively that there was an appeal pending against the judgment upon which the bankruptcy notice was based. His Honour took into account the conduct of the debtor in relation to the appeal, which had been less than energetic, in his decision.
It is noteworthy that there is currently in force no stay of execution in relation to the judgment debt founding the bankruptcy notice. Neither is there in force any stay of execution in relation to the other debt referred to in the petition. This debt was for professional fees in relation to family law proceedings and was the subject of an 11-day hearing before the Local Court and an appeal to the Supreme Court which was dismissed.
It is the debtor’s case that the creditor is himself preventing a proper investigation of her allegations against him that he has already paid himself out of monies collected from the debtor’s late father’s estate. She argues that if this is occurring then the creditor should not be able to use his own fault to secure the sequestration order against her. She refers to Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 a decision of the Full Bench of the Federal Court. To quote from the head note:
“(3) Conduct by a judgment creditor which prevents a judgment debtor from paying the debt may operate to disentitle the judgment creditor from proceeding to immediate execution. The debtor bears the onus to prove affirmatively that the claim in respect of which the bankruptcy notice was issued could and would have been paid but for some act or omission on the part of the creditor.”
The debtor argues that the creditor has consistently refused to deliver up documents in his possession which would clearly show the payment of the debt. This is a matter which has been raised previously by the creditor in the proceedings before Gibson DCJ. Part of the transcript of those proceedings is exhibited to the debtor’s affidavit. The case of the creditor is simply that he does not have these documents. I suggested to the debtor that there were other documents she could have subpoenaed which would have immediately indicated whether or not payment had been made. A solicitor is obliged to keep both trust accounts and office accounts. The trust account is regularly audited. If there had been a payment from his trust account in which the estate debts had been collected into his office account in payment of his fees then this would be clearly indicated. I do not understand why such a document could not have been subpoenaed in any of the previous proceedings.
I accept that if the creditor had been deliberately preventing the debtor from paying her account then he would have difficulties in pursuing the petition. But I do not believe that the evidence presented by the applicant is sufficient for me to make such a finding. The debtor told me in her submissions that many of the documents which she had sought were delivered to one of the hearings in the District Court but she did not go through them. The documents appear to consist of the records of the estate of her late father but as I have previously noted there is a much more immediate way of finding out what money was recovered and to what use it was put.
The second point the debtor makes is that she is solvent. This is also made by assertion rather than proof. It is true that she has a property. However, one of the many orders made in other proceedings between these parties included an order granting the creditor a charge over this property. The creditor has agreed to surrender this charge for the benefit of all other creditors in any bankruptcy. There is no evidence as to the net value of the property or how speedily funds could be raised upon it in order to pay the debts deposed to in the affidavit of debt filed in these proceedings. The debtor says that she is entitled to indemnity from the estate of her late father. No payment in respect of that indemnity has been made to her over the last ten years. I have not seen any evidence of the current value of the estate and would voice doubts as to whether it would not already have been completely distributed amongst the various beneficiaries. I am not satisfied that there is substantive proof of the debtor’s solvency.
On 9 September 2002 Handley JA in the NSW Court of Appeal refused leave to appeal against the orders of Hosking DCJ and Gibson DCJ. The debtor has come to the end of the line.
On 10 September 2002 the applicant filed out of time and without leave a further affidavit. This exhibits two ledger accounts, one entitled “F Coombe” and the other “Harris Estate”. The Coombe account numbered C81 is entitled “Lease of Premises”. The Harris Ledger shows payments made by a series of debtors into the Harris Estate. There are no payments made out of this account. In her affidavit the applicant says:
“In an affidavit dated 6 September 2002 the creditor applicant submitted evidence in the Supreme Court before Justice Handley that he had money in a trust account to which I had a half interest as beneficiary of the estate of the late Douglas Sinclair Harris and that he has taken money out of another trust account since the judgment of Hosking J on 13 February 2001 for himself. His statement to this court that he has received no funds since the judgment of Hosking J is incorrect as he has taken it for himself. “
She also says at paragraph 6:
“There are other trust ledger cards for the sale of the business of Harris Ward and Crossman, and assets of the estate for which he has not accounted and which should have funds and for the work in progress totalling $21,000.00 since 1990.”
I am not assisted by this affidavit or by the ledger cards attached. The Harris Estate ledger card indicates a credit of $6,298.79 in the trust account as at 20 December 1990. It tells me nothing about the creditor having received money on account of the debtor. The F Coombe trust account indicates two payments made to Anthony Ziade Trust Account, one in the sum of $1,697.25 and the other in the sum of $483.34. There is no explanation of how these sums tie in to the amount claimed by the creditor. Without such evidence I am not prepared to make the finding required of me by the applicant.
I am satisfied of the matters required under s.52 of the Bankruptcy Act 1966 (Cth). I make a sequestration order against the estate of Faye Diane Combe. I note that Scott Pascoe, a registered trustee in bankruptcy has consented to act as trustee of the estate and I appoint him trustee. I order that the costs of the petitioning creditor be taxed in accordance with the Federal Court Rules and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: