JB Solicitors Pty Ltd v Cam, in the matter of the Bankrupt Estate of Cam

1. The application for review be dismissed.
2. The petitioner's costs of defending the application in the sum of $4,000.00 be paid out of the Respondent's bankrupt estate. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

PERRAM J: 1 On 11 July 2023, a Registrar of this Court made an order sequestrating the estate of Dai Thanh Liem Cam under the provisions of the Bankruptcy Act 1966 (Cth) ('the Act'). Where a Registrar exercises the power of the Court, a party may apply for a review of that exercise of power. Mr Cam applied for an order seeking such review on 1 August 2023. On such review, the Court exercises the power afresh and it is not necessary to inquire into whether the power was erroneously exercised at first instance. 2 A sequestration order was made following the failure of Mr Cam to pay his lawyers' fees in relation to certain Federal Circuit and Family Court of Australia proceedings. The lawyers' practice was conducted by a firm known as JB Solicitors Proprietary Limited, which I will refer to as JBS. 3 JBS acted for Mr Cam in relation to the family law proceedings. The family law proceedings comprised an element relating to a property dispute and an element relating to the custody of the children of the marriage. JBS provided Mr Cam with a costs agreement and this appears to have been executed by him on 12 August 2019. The executed agreement is in evidence. On the present application, it was not disputed that Mr Cam had signed this agreement, as will be noted in due course. At earlier times in proceedings related to the present application, Mr Cam has denied that he signed the agreement. Following the execution of the retainer letter, JBS says that it did work for Mr Cam and invoiced him on a number of occasions. All of the fees which were invoiced remain unpaid. It is the case, however, that he paid $500.00 upfront at the first consultation with JBS. 4 In evidence as Exhibit 2 was a printout of all of the invoices which have been issued to Mr Cam. With the exception of the last six entries, each relates to work which was done prior to 7 October 2021. Despite those invoices having been issued to him, the evidence does not contain any suggestion that Mr Cam ever raised with JBS the fact that the invoices were not due on any particular basis. On the present application, Mr Cam sought to establish that, despite the terms of the written agreement he had with JBS, there had, in fact, been a discussion between him and JBS at around the time that the retainer agreement was executed which had resulted in an oral agreement. That oral agreement had been to the effect that JBS would only charge Mr Cam a fee for its services in the event that he was successful in recovering 75 per cent or more of the assets of the marriage. I will return to an assessment of that contention shortly. The point for present purposes is that Mr Cam's conduct after receiving the very many invoices which are set out in Exhibit 2 is inconsistent with the existence of the oral arrangement for which he now contends. If that had been his understanding of the agreement, then a more likely outcome would have been that he would have pointed out to the solicitors that the fees were not due because they were not consistent with the oral arrangement which he says they had. 5 On 28 February 2022, JBS filed a statement of claim against Mr Cam in the Sydney Registry of the District Court of New South Wales. They claimed the liquidated sum of $123,100.60, together with interest up to judgment and costs. The total amount claimed was for $132,334.28. On 5 May 2022, JBS sent by express post a letter to Mr Cam's last known address indicating that it proposed to apply for default judgment in the event that Mr Cam did not reply within three days of the date of that letter. 6 No such reply was received and on 23 May 2022, JBS filed a notice of motion for default judgement in the District Court. The sum sought was $131,472.28 inclusive of costs. On 23 May 2022, JBS obtained default judgment against Mr Cam in that sum. On 8 July 2022, JBS sent a letter to Mr Cam by express post, enclosing a copy of the default judgment and indicating that it intended to seek the issue of a bankruptcy notice. On 26 July 2022, JBS presented to the Official Receiver's office a bankruptcy notice which it sought the issue of to Mr Cam. On the same day, that is 26 July 2022, the Official Receiver issued the bankruptcy notice as requested. 7 On 27 July 2022, JBS sent the bankruptcy notice and another copy of the default judgment to Mr Cam's last known address in Cabramatta. On 2 August 2022, JBS caused to be served on Mr Cam the bankruptcy notice, the default judgment, an Australian Financial Security Authority warning letter and a covering letter. It did so by having them affixed to Mr Cam's front door. The bankruptcy notice required Mr Cam to pay the amount demanded within 21 days of its service upon him. That 21-day period expired on 23 August 2022 and hence an act of bankruptcy would be committed on 24 August 2022. As it happens, Mr Cam did not pay the sum demanded and thereby committed an act of bankruptcy on 24 August 2022: see s 40(1)(g)(i) of the Act. 8 On 4 January 2023, well after the expiry of that 21-day period, JBS filed in this Court a creditor's petition seeking the sequestration of Mr Cam's estate. The basis upon which that petition was presented was the commission of the act of bankruptcy by Mr Cam on 24 August 2022. At the time that the petition and the affidavit in support of the petition were filed, there was some uncertainty as to the precise date on which the act of bankruptcy occurred. However, this does not matter. It is apparent that by the time the matter came before the registrar for determination, that error had been worked out. 9 On 22 March 2023, no doubt in an effort to stave off the incoming petition, Mr Cam filed in the District Court of New South Wales a notice of motion seeking to set aside the default judgment which had been entered against him. This was supported by an affidavit by Mr Cam, which was itself dated 22 March 2023. In this affidavit, Mr Cam denied on oath that he had signed a costs agreement and he said instead that he had an arrangement with JBS that there would be no fees due unless he won his family law proceedings. In part, that affidavit is inconsistent with the case now pursued before this Court today. The inconsistency is that whereas he swore in the District Court that he had not signed the agreement, he accepted in this Court that he had. On the other hand, the affidavit in the District Court is consistent with the oral agreement which Mr Cam now pursues in this Court. 10 The notice of motion was eventually listed in the District Court for hearing on 14 April 2023. At that time, Mr Cam appeared with a McKenzie friend, Mr Borg, who I permitted to appear in the proceeding this afternoon. In the District Court on 14 April 2023, Mr Cam indicated that he did not wish to file any further evidence on the notice of motion to set aside the default judgment. The motion was then listed for hearing on 8 June 2023. On that day, the notice of motion came before Weber DCJ but Mr Cam did not appear at that time. His Honour therefore dismissed the notice of motion with costs. 11 Turning then to the proceedings in this Court. On 20 June 2023, Mr Cam filed in this Court a notice stating his grounds of opposition to JBS's creditor's petition. The notice, contrary to r 2.06(b) of the Federal Court (Bankruptcy) Rules 2016 (Cth), did not in fact specify any grounds of opposition, although it did indicate that Mr Cam intended to be assisted by Mr Borg, as indeed has happened. An affidavit prepared by Mr Cam, dated 20 June 2023, identified his McKenzie friend as Mr Borg. Both before the filing of a notice of grounds of opposition and afterwards, the matter has been listed on a number of occasions in this Court. Up to and including the hearing at which the sequestration order was made, there were seven hearings before the Registrar. At only three of those did Mr Cam appear. At the other four he did not. 12 Amongst the four hearings at which he did not appear was the final hearing of the petition before Registrar Ditton, which took place on 11 July 2023. In the absence of Mr Cam, the registrar expressed himself satisfied with the preconditions to the exercise of the power to sequestrate Mr Cam's estate as having been satisfied and accordingly made the sequestration order sought. At the same time, he made a number of ancillary orders. It is the orders made by Registrar Ditton on 11 July 2023 which are now subject to Mr Cam's interlocutory application seeking a review of the Registrar's determination. 13 Turning to the substance of the matter, the bankruptcy notice was served on Mr Cam on 2 August 2022. The evidence of Mr Lee establishes that Mr Cam did not pay the amount or any part of the amount demanded in the bankruptcy notice by 23 August 2022. I am satisfied that Mr Cam therefore committed an act of bankruptcy on 24 August 2022: s 40(1)(g)(i). I am satisfied that as at 24 August 2022, Mr Cam was ordinarily resident in Australia. The power to make a sequestration order therefore arises since each of the preconditions to the operation of s 43(1) has been satisfied. 14 In this Court, Mr Cam, through Mr Borg, submitted that the sequestration order ought not to be made. The reason it was said that it should not be made was because the amounts claimed by JBS were not due. The amounts were not due because the oral arrangement between Mr Cam and JBS was such that they only became entitled to charge fees in the event that he achieved a result which was better than 75 per cent of the assets of the marriage in the family law proceedings. Leaving aside procedural objections which might be raised against this argument being put at the 11th hour at the hearing of a review application following the making of a sequestration order, it is convenient to note two alternate ways in which this argument is put. The first is that Mr Cam says that on the basis of the agreement which he now alleges, he proposes to file a fresh notice of motion in the District Court, seeking to set aside the default judgment. The second basis upon which he puts it is he says that, in effect, I should take into account the fact that the underlying debt upon which the petitioning creditor relies does not exist because of the oral agreement. 15 In relation to the first limb - that is, Mr Cam's intention to put on a notice of motion in the District Court seeking for a second time to set aside the default judgement - I do not think that that would in itself provide a sufficient reason now not to confirm the Registrar's sequestration order. Although the orders made by the District Court in the disposal of the notice of motion were interlocutory in nature, nevertheless I think that the filing of a second notice of motion would be an abuse of process: see Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44. 16 As to the second basis upon which the argument is put, this turns for its efficacy in the present hearing upon the Court being satisfied that there is some substance to the contention that there was an oral agreement of the kind now alleged by Mr Cam. Mr Cam gave sworn evidence before me today. That evidence was given through an interpreter and the circumstances of its provision were not altogether without some difficulty. 17 It may be open to question whether in fact Mr Cam gave evidence which actually supports the existence of the oral arrangement for which he now contends. However, for present purposes, I am prepared to accept that I should take his evidence to be as Mr Borg suggests it is. That is, to be clear, I will assume that Mr Cam this afternoon gave evidence that at the time the retainer agreement was entered into, there was an oral arrangement between himself and whoever the solicitor who was present at that time was, to the effect that JBS would only charge Mr Cam professional fees in the event that the firm was successful in recovering on Mr Cam's behalf in those proceedings a sum which represents more than 75 per cent of the marital assets. 18 I do not accept Mr Cam's evidence that any such conversation took place. There are four reasons for this. First, such an oral arrangement is inconsistent with the surrounding correspondence which exists from the time. That correspondence includes a letter of 7 October 2020 and a letter of 3 February 2021. Both of these letters make clear that several discussions took place between Mr Cam and his solicitors in which proposed settlement figures, well below 75 per cent, were put. The putting of such a proposal by Mr Cam is inconsistent with the suggested idea that his attorneys would only be paid if a figure greater than 75 per cent were achieved. 19 The second reason I do not accept Mr Cam's evidence is that if the arrangement was as he now alleges, then it is highly unusual that when he received the very many invoices which he was sent (usefully set out in Exhibit 2) he did not once suggest in response to those invoices any element of surprise at being charged in terms contrary to what he now says the arrangement was. 20 The third reason I do not accept his evidence about this is that up until today, Mr Cam's sworn evidence in the District Court was that he had never signed the retainer agreement. The retainer agreement clearly has his signature on it and in this Court today he did not persist in the suggestion that he had not signed the agreement. Nevertheless, the fact that he was willing to swear what appears to me to have been a false affidavit in the District Court suggests that one should treat with some circumspection his evidence. 21 The fourth reason I do not accept his evidence is that he said in the witness box that he did not receive a number of letters which from the face of the solicitors' file were sent to him. However, a closer review of the solicitors' file notes records that some letters were passed to him at conferences. Further, there is evidence that Mr Cam authorised his daughter to receive emails on his behalf and that emails were accordingly sent to her. There is also the fact that Mr Cam has appeared in these proceedings and in the District Court proceedings. If his account that none of the letters which were sent to him were received by him is true, it is difficult to know how he knew about today's proceedings. In all of those circumstances, I do not accept Mr Cam's oral evidence that there was such an arrangement. 22 The situation before the Court is that an act of bankruptcy has been committed and there is nothing that I can see as to why a sequestration order should not be made. Default judgment was obtained against Mr Cam and his attempt to set aside that default judgment failed. I see no reason to doubt the correctness of the judgment entered by the District Court. I therefore conclude that the orders made by the Registrar are appropriate and I see no reason to set them aside. The review application will be dismissed and I will order that the petitioning creditor's costs of defending the review application in the sum of $4,000.00 are to be paid from Mr Cam's bankrupt estate in accordance with the Act. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram.