Case: Totev v Sfar [2006] FCA 470 , 230 ALR 236
Outcome: applied
reasons for decision of the Federal Magistrate who made the sequestration order in September 2008 referred to the Statement of Claim and relevantly concluded: [6] ... It is pleaded with some detail, but its merits and prospects of success are not immediately apparent, and there is no sufficient evidence before me that there would be "other sufficient cause" for the Court to decline in its discretion to make a sequestration order, pursuant to principles such as were discussed by Allsop J in Totev v Sfar [2006] FCA 470. I am not satisfied that the debtor has shown that she has a claim against the applicant exceeding the amount of the debt relied on in the petition, which is "likely to succeed" and is being pursued with sufficient expedition. The decision of the Federal Magistrate whose decision is now under appeal referred to the earlier September 2008 decision and concluded: [15] There has been no appeal to the Federal Court from his Honour's judgment. In my view, it is an inappropriate course for a bankrupt to seek, by annulment application, to achieve what she is unwilling or unable to achieve through an appeal, namely the reconsideration of the reasons of this Court for the making of the sequestration order. In any event, I accept from the evidence of Mr Steel that those District Court proceedings appear to be a defensive action in order to avoid dealing with the bills of costs rendered by Ms Murphy for the family law proceedings. The trustee has been unable to form a view as to the prospects of success of the claim in the District Court as he has not been funded to pursue or inquire into them. Those proceedings are presently stayed by the bankruptcy. The Magistrate then went on to give an account of the proceeding in the Family Court and concluded as follows: [17] ... Her case against Ms Murphy centres on the proposition that the conduct of Ms Murphy prevented her from accepting that offer. That is one possible characterisation. Another is that there was an offer on the table for higher than what Ms Murphy had advised Ms Revis she could expect to get on a judgment, but Ms Revis had unrealistic expectations and Ms Murphy pursued the matter as best she could in accordance with her instructions. I accept, based upon the available material, that Ms Revis has an arguable case of professional negligence in the District Court, but that does not alter my conclusions about the motivation for those proceedings and the manner in which they have been conducted. ... [20] Further, Ms Revis has failed to satisfy me that she is solvent. ... [21] I do not accept that the sequestration order made by this Court should not have been made. It is unnecessary to consider the factors relevant to an exercise of the Court's discretion but, in general terms, the interests of creditors would be best served by the orderly administration of Ms Revis' affairs in the bankruptcy and the realisation of her interest in the house property before that equity is further dissipated. Clearly, the Federal Magistrate was not satisfied that the sequestration order ought not to have been made and, had the occasion arisen for the exercise of the discretion conferred by s 153B, he would have exercised that discretion adversely to the now Appellant. He reasoned that: it was not appropriate to employ the mechanism provided for by s 153B to contest the orders made in September 2008; and " [i]n any event ", the " motivation " for the District Court proceeding was " to avoid dealing with the bills of costs rendered by Ms Murphy for the family law proceedings ". Notwithstanding the submission of the Respondent that it was the failure to satisfy the Federal Magistrate as to solvency which formed the basis of the Federal Magistrate's decision, it is considered that paragraph [15] was either the principal basis upon which the Magistrate proceeded or a very significant reason for his decision to dismiss the application being advanced. In so proceeding, it is respectfully considered that the Federal Magistrate erred. Centrally relevant to whether a sequestration order may be made are the financial circumstances of the debtor. Section 52(2) of the Bankruptcy Act 1966 (Cth) thus provides as follows: If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b) that for other sufficient cause a sequestration order ought not to be made; it may dismiss the petition. " Other sufficient cause " may include a claim sounding in money by the debtor against a petitioning creditor: Totev v Sfar [2006] FCA 470 , 230 ALR 236.