Miller v Udunuwara

Federal Court of Australia|2024-12-09|Before: Dowling J

THE COURT ORDERS THAT:

Pursuant to r 8.21 of the Federal Court Rules 2011 (Cth) (Rules) and s 33(1)(b) of the Bankruptcy Act 1966 (Cth), paragraph 4 of the Creditor's Petition be amended so that the date of the act of bankruptcy read '15 February 2024' in place of '19 February 2024'.
Pursuant to r 1.34 of the Rules, the requirements of rr 8.23 and 8.25 of the Rules (requiring the filing and service of an amended document) in relation to the amended Creditor's Petition are dispensed with.
The estate of CHRIS JOSEPH UDUNUWARA be sequestrated under the Bankruptcy Act 1966 (Cth).
The applicant creditor's costs, including any reserved costs, of the proceeding be taxed and paid from the respondent's estate in accordance with the Bankruptcy Act 1966 (Cth). THE COURT NOTES THAT:
The Court notes that the date of the act of bankruptcy is 15 February 2024.
The Court also notes that a consent to act as trustee signed by Daniel Peter Juratowitch has been filed under s 156A of the Bankruptcy Act 1966 (Cth). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT DOWLING J
Before the Court is a creditor's petition for the sequestration of the estate of Chris Joseph Udunuwara. The creditor's petition describes a debt of $60,360.92 owed by Mr Udunuwara, the respondent debtor, to Rodney Marc Miller, the applicant creditor, pursuant to an order of the Magistrates' Court of Victoria dated 15 December 2023. There was no dispute about the existence of that debt.
Mr Udunuwara was served with a Bankruptcy Notice, consistent with s 41 of the Bankruptcy Act 1996 (Cth) and reg 9 of the Bankruptcy Regulations 2021 (Cth), on 25 January 2024 seeking the payment of the debt of $60,360.92 (or the making of arrangements to the creditor's satisfaction for the settlement of the debt). Mr Udunuwara has not complied with the Bankruptcy Notice.
For the reasons set out below it is appropriate to make the sequestration and ancillary orders sought by the applicant.

Relevant provisions of the Act

Section 27 of the Act provides this Court with jurisdiction in matters of bankruptcy.
Section 43(1) of the Act provides the Court with jurisdiction to make sequestration orders. That section provides:
Subject to this Act, where: (a) a debtor has committed an act of bankruptcy; and (b) at the time when the act of bankruptcy was committed, the debtor: (i) was personally present or ordinarily resident in Australia; (ii) had a dwelling‑house or place of business in Australia; (iii) was carrying on business in Australia, either personally or by means of an agent or manager; or (iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager; the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.
Section 40(1)(g) of the Act relevantly provides that a debtor commits an act of bankruptcy when they do not comply with a bankruptcy notice.
Section 52(1) of the Act sets out those matters of which the court will require proof in the hearing of a creditor's petition. That section provides: (1) 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.
Section 52(2) of the Act relevantly provides that if the Court is not satisfied of the matters in s 52(1) or is satisfied that the debtor is able to pay their debts, then it may dismiss the creditor's petition.

CHRONOLOGY OF EVENTS

In circumstances where the chronology of events is relevant to matters to be considered, I set out the following brief chronology.
On 15 December 2023, the Magistrates' Court of Victoria made an order that Mr Udunuwara pay Mr Miller the value of the claim of $55,376.30, interest of $364.12 and the costs of $4,620.50, totalling $60,360.92.
On 25 January 2024, the Bankruptcy Notice was issued. The notice and order of the Magistrates' Court of Victoria were served, via email, on Mr Udunuwara on 25 January 2024.
On 20 February 2024, Mr Miller commenced this proceeding by filing a creditor's petition in this Court. On 27 June 2024, Registrar Curnow adjourned the hearing of the petition to 11 July 2024. On 11 July 2024, Mr Udunuwara appeared before Registrar Ellis and requested that the proceeding be determined by a judge pursuant to s 35A(7)(b) of the Federal Court of Australia Act 1976 (Cth). On that day Registrar Ellis made orders referring the matter to a judge of this Court.
On 15 August 2024 at 11:12am, Mr Udunuwara sent an email with attachments to the Court. In that email, Mr Udunuwara stated that he would be receiving "between $300,000 to $400,000 in profit share over the following six to eight weeks (if not earlier)" and that "I am also undertaking a $2m capital rising for my business. This will enable me to full pay Mr Miller."
At a case management hearing on 16 August 2024, Mr Udunuwara requested an adjournment on the basis that he would be receiving a "profit share" at the end of September of between $400,000 to $600,000. At that case management hearing, I made timetabling orders including orders to allow Mr Udunuwara to file any notice of grounds of opposition and supporting affidavits by 6 September 2024. No notice or affidavits were filed by that date.
On 10 September 2024 at 12:30pm, Mr Udunuwara sent an email with attachments to the Court's registry. That email was described by Mr Udunuwara as "grounds for opposition". The email stated that: between October 2023 to September 2024 Mr Udunuwara had "received over $624,000 in profit share and bonuses"; that Mr Udunuwara's projected personal earnings will be "more than $100,000 to $200,000 per week" in the next two months; and that his weekly income was projected to be "more than $1m per week within twelve months." Further, Mr Udunuwara claimed that he would receive "between $380,000 and $450,000 in profit share by the end of September or early October." The email also set out Mr Udunuwara's assets, liabilities and expenses as follows: "ASSETS: Cash in bank at any time varies between $5,000 and $50,000 per month. Art: $60,000 Books: $20,000 Furnishings : $50,000 Car; $8,000 Profit share entitlement approximately $200,000 per month which will begin in four to five weeks. LIABILITIES: Rodney Marc Miller $60,000 EXPENSES: Rent $6,900 per month. (I sold my house some time ago). Electricity and Gas, approximately $300 per month. Food and wine: Approximately $2,000 per month."
On 14 October 2024 at 11:08am, Mr Udunuwara emailed the Court's registry. In that email Mr Udunuwara stated that he had "received $15,000 in profit share" and that he expected "another $200,000 to $300,000 in the following three weeks, if not earlier."
On 2 December 2024 at 3:18pm, Mr Udunuwara emailed the Court stating that "within a minimum of a week and a maximum of two weeks" he would "fully pay the outstanding debt". Mr Udunuwara said: "I have received $42,000 last Thursday 28th November 2024 as a profit share and have approximately two amounts of $241,000 and $248,000 due to me within the following week to two weeks, hence how the outstanding debt will be fully paid."
On 3 December 2024 at 8:22am, the morning of the hearing, Mr Udunuwara sent another email to the Court stating that he was "now in a position…to fully pay the debt at the latest in two weeks, although most likely within a week."

Material relied upon

The applicant relied upon the following affidavits:
Affidavit of Search and Service of Bankruptcy Notice of Adam Zuchowski affirmed 20 February 2024;
Affidavit in Support of Substituted Service of Creditor's Petition of Adam Zuchowski affirmed 8 March 2024;
Affidavit of Service of Creditor's Petition of Cale opt Hoog affirmed 23 April 2024;
Affidavit of Final Debt of Rodney Marc Miller affirmed 10 July 2024;
Affidavit of Final Search, Adjournment Notification and Service of Cale opt Hoog affirmed 10 July 2024;
Affidavit of Final Debt of Rodney Marc Miller affirmed 15 August 2024;
Affidavit of Final Search of Cale opt Hoog affirmed 15 August 2024;
Affidavit of Final Search, Adjournment Notification and Service of Cale opt Hoog affirmed 2 December 2024; and
Affidavit of Final Debt of Rodney Marc Miller affirmed 2 December 2024.
The applicant also relied upon his written submissions dated 30 September 2024 and augmented those submissions orally at the hearing.
Mr Udunuwara did not file any affidavits, submissions or notice of grounds for opposition (save for his email of 10 September 2024 described above).

GROUNDS FOR SEQUESTRATION

On the material before the Court, I am satisfied of each the following procedural and compliance matters:
The Bankruptcy Notice was in the prescribed form and was obtained in respect of a judgment of the Magistrates' Court of Victoria that was more than the statutory minimum of $5,000 prescribed by s 41(1) of the Act.
The Bankruptcy Notice was issued within 6 years of the order of the Magistrates' Court of Victoria: s 41(3) of the Act.
When served, the Bankruptcy Notice had attached with it a certified extract of the order of the Magistrates' Court of Victoria: Curtis v Singtel Optus Pty Ltd [2014] FCAFC 144; 225 FCR 458 at [35].
The Bankruptcy Notice was served on Mr Udunuwara on 25 January 2024, within six months of it being issued: reg 10 of the Regulations.
The creditor's petition was issued on 20 February 2024, within six months of the date of the act of bankruptcy and relates to a debt larger than $5,000: s 44(1)(a) and (c) of the Act.
The creditor's petition was accompanied by an affidavit of search pursuant to r 4.04(1)(a) of the Federal Court (Bankruptcy) Rules 2016 (Cth).
The creditor's petition has not lapsed because it has been less than 12 months since the date of presentation of the petition: s 52(4)(a) of the Act.
The applicant has filed and served affidavits of final search and affidavits of final debt (on 2 December 2024) consistently the with r 4.06 of the Bankruptcy Rules.
On the material before the Court, I am also satisfied of each of the requirements of ss 43 and 52 of the Act, namely:
Mr Udunuwara did not, and has not, paid the debt and has therefore committed an act of bankruptcy for the purposes of s 43(1)(a) and s 40(1)(g) of the Act by failing to comply with the notice.
When the act of bankruptcy was committed Mr Udunuwara was personally present or ordinarily resident in Australia: s 43(1)(b)(i) and (ii) of the Act.
In all of the circumstances above the applicant has proven: the matters in the petition, service of the petition and that the debt is still owing: s 52(1) of the Act.
Where the applicant has established all the matters required by s 52(1) of the Act he has a prima facie right to a sequestration order: Toyota Finance Australia Ltd v Youssef Berro [2022] FCA 497 at [33], Aquamore Credit Equity Pty Ltd v Maroon (No 2) [2024] FCA 14 at [31].

Solvency

At the hearing on 3 December 2024, Mr Udunuwara confirmed that he was not submitting that he is able to pay the debt now, but rather that he will pay it in two weeks: Transcript, page 10, lines 11-41. Clearly, that was not a submission that he was presently able to pay his debts as provided for by s 52(2) of the Act.
In any event, and out of an abundance of caution that I have misunderstood Mr Udunuwara, I will treat Mr Udunuwara's email of 10 September 2024 as a submission that he is able to pay his debts and is solvent.
The respondent bears the onus of proving that he is able to pay his debts: See Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8; 343 ALR 632 at 644 to 645 [44] (Allsop CJ, Dowsett and Besanko JJ). That onus on the respondent is on the balance of probabilities: See Coates Hire Operations Pty Ltd v D-Link Homes Pty Ltd [2011] NSWSC 1279 at [66] (White J). The Court would ordinarily expect a debtor to produce the most cogent evidence available.
In Begonia Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075 at 1081 Hayne J stated: Ordinarily one would expect that on an application of this kind the company would provide the fullest and best possible material in support of its case. Thus one would ordinarily expect that the agreements between Texel and Redlock (for I would assume them to be written and not oral) would be produced in evidence.
However, the provision of the "fullest and best possible material" should not be understood as an obligation in establishing solvency. It is what one would "ordinarily expect". It is a consideration in the assessment of whether the onus has been discharged on the balance of probabilities: See Coates at [66], Deputy Commissioner of Taxation v De Simone Consulting Pty Ltd [2007] FCA 548 at [14] (Finkelstein J), Xu v Megaward Pty Ltd [2018] NSWCA 232; 130 ACSR 412 at 417 to 418 ([30] to [32]) (McColl, Meagher and Leeming JJA), Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Ltd [2012] FCA 363; 127 ALD 64 at [64] (Robertson J) and Bullen v Mangano [2024] FCA 1199 at [14] (Goodman J).
The email of 10 September 2024 did not include any documents to substantiate the matters it set out about Mr Udunuwara's assets, liabilities and expenses. The applicant submitted, and I accept, the contents of the email are mere assertions about the position of the respondent. The email and the assertions are not probative evidence of the financial position of the respondent let alone the "fullest and best" evidence.
In any event the email is less than definitive about the assets of the respondent. "Cash in bank" is described as "at any time varies between $5,000 and $50,000 per month." The profit share is described as "an entitlement [of] approximately $200,000 per month which will begin in four to five weeks" with no information since that time as to whether it did commence. There is no detail about the art, books, furnishings and car.
At the hearing Mr Udunuwara made no submissions about the position of his assets, liabilities and expenses set out in the 10 September 2024 email (save for his statements about a profit share explained below). At the hearing Mr Udunuwara did not provide any further information about his financial position as set out in the 10 September 2024 email.
The 10 September 2024 email does not discharge the onus of establishing that Mr Udunuwara is able to pay his debts. I am not satisfied that Mr Udunuwara is presently able to pay his debts as provided for by s 52(2) of the Act.

Amendment to the creditor's petition

At the hearing, but with notice first provided to the respondent on 14 August 2024, the applicant sought to amend the date of the act of bankruptcy on the creditor's petition from "19 February 2024" to "15 February 2024". The applicant explained that this was necessary because the date of service of the Bankruptcy Notice was 25 January 2024 (as served by email pursuant to reg 102 of the Regulations) and the proper calculation of 21 days from that date is 15 February 2024. The applicant explained that the original date of 19 February 2024 incorrectly added in time for postage that was not required given the service by email.
The applicant submitted, and I accept that that amendment does not create a new petition: See Jensen v Queensland Law Society Incorporated [2006] FCA 1206; 154 FCR 525 per Kiefel J at [33] - [35].
Out of caution the applicant sought an ancillary order pursuant to r 1.34 of the Rules for dispensation from the requirement of rr 8.23 and 8.25 (requiring the amended creditor's petition to be filed and served).
There was no opposition by Mr Udunuwara to the amendment or the ancillary order.
In assessing the amendment it is necessary to consider: the extent of any delay in applying for amendment; the costs associated with the delay; as well as any prejudice which might reasonably be assumed to follow from an amendment: See Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175, in the judgment of Gummow, Hayne, Crennan, Kiefel and Bell JJ at [102]-[103]
I am satisfied there is no prejudice to the respondent by the amendment. None was claimed. I am satisfied that there was no unreasonable delay or additional cost created by the amendment. I am satisfied that it is appropriate to make the amendment.

Adjournment

At the conclusion of the hearing Mr Udunuwara requested an additional two weeks to repay the debt owed to the applicant. Whilst no formal application for an adjournment was before the Court, I received that request as an application to adjourn the proceeding for two weeks.
The only submission made by Mr Udunuwara in support of that adjournment was his assertion that he would receive "about $680,000 of profit share … one lot of $210,000 in the next two to three days, and another lot of between $180,000 and $400,000 … The reason that I'm getting - you know, that I will be receiving finance over - up close to $600,000."
Mr Udunuwara did not provide any documentation to support that submission or provide any other explanation. The adjournment was opposed by the applicant.
In assessing the application for the adjournment I consider, amongst all of the circumstances, the explanation for the adjournment, together with: (1) the interests of the parties; and (2) the effect of an adjournment on court resources and the competing claims by litigants in other cases: See Sali v SPC Ltd [1993] HCA 47; 67 ALJR 841 at 843-844 and s 37M of the Federal Court of Australia Act 1976 (Cth).
The explanation for the adjournment must be assessed in the context of the several representations made by Mr Udunuwara about his impending profit shares and intention to pay the outstanding debt set out in the chronology of events above at [10] - [18].
In all the circumstances set out above I am not satisfied that the explanation for the adjournment provides a proper basis for the adjournment. I weigh that together with the detriment to the applicant and the detriment to the court and other litigants. The detriment to the applicant will be further delay. The applicant is entitled to have his petition heard. Time and cost will be wasted by a 2-week delay. Further, the time and resources of the Court may be wasted. Time that could be given to other litigants before this Court.
I am not satisfied there is any justifiable basis to adjourn the hearing. I refuse the adjournment request.

Further correspondence to the Court

After the hearing of this matter, and two and a half hours before the judgment was to be handed down, my chambers received correspondence from Mr Udunuwara asserting that he had made payments totalling $50,000 to the trust account of the solicitors for the applicant.
I am unable to test the veracity of that assertion. The time and place for the presentation of argument or the production of evidence was at the hearing: See Frugtniet v Secretary, Department of Social Services [2021] FCAFC 127; 285 FCR 159 at [85] and the cases to which it refers (per Wheelahan and Snaden JJ, O'Callaghan J agreeing).
In any event, even accepting the assertion of Mr Udunuwara, that part payment of the debt to the applicant does not undermine the matters established above in satisfaction of the sequestration order.

DISPOSITION

In all of the above circumstances it is appropriate to make the following orders:
Pursuant to r 8.21 of the Federal Court Rules 2011 (Cth) (Rules) and s 33(1)(b) of the Bankruptcy Act 1966 (Cth), paragraph 4 of the Creditor's Petition be amended so that the date of the act of bankruptcy read '15 February 2024' in place of '19 February 2024'.
Pursuant to r 1.34 of the Rules, the requirements of rr 8.23 and 8.25 of the Rules (requiring the filing and service of an amended document) in relation to the amended Creditor's Petition are dispensed with.
The estate of CHRIS JOSEPH UDUNUWARA be sequestrated under the Bankruptcy Act 1966 (Cth).
The applicant creditor's costs, including any reserved costs, of the proceeding be taxed and paid from the respondent's estate in accordance with the Bankruptcy Act 1966 (Cth). I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Dowling.

Bankruptcy Act 1996(Cth)

Bankruptcy Act 1966(Cth)ss 27, 33, 40, 41, 43, 44, 52

Federal Court Rules 2011(Cth)rr 1.34, 8.21, 8.23, 8.25

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