The Owners - Strata Plan No. 20347 v Saha

C. Stay orders 16 On 4 June 2021, after the review application was filed by solicitors on behalf of Mr Saha, Markovic J made programming orders for the filing of evidence and submissions and that the proceeding be referred to the National Operations Registrar for allocation to a docket judge for hearing. The orders also noted a time in June or July of this year for a hearing date. The proceeding was docketed to me in mid-June. 17 On 11 June 2021, Mr Wiseman of Bannermans Lawyers on behalf of the applicant emailed the Court attaching what were described as "consent orders signed by the parties". The email also attached a letter from Mr Saha's trustee in bankruptcy which noted that he consented to the proposed orders. Those orders sought to stay the sequestration order and extend the timetable for the serving of evidence and submissions in respect of the application and to have the hearing "not before 26 October 2021". At this time Mr Saha was represented by Pannu Lawyers. 18 Mr Wiseman's covering email (which was sent to the associate of Markovic J) relevantly explained that: The parties have agreed and signed the attached proposed consent orders to vary the current timetable to permit the Respondent a period of 120 days to realise its assets and satisfy the amounts owing to the Applicant. The parties respectfully request that Her Honour make the attached orders in Chambers in the interest of facilitating a mutually acceptable resolution to proceedings and minimising the time and cost to the parties and demand on the Court's resources. 19 I was not content to make the orders without hearing from the parties because I was concerned about whether it was legally possible to stay the sequestration order and whether staying the order, if possible, may in any event not achieve the desired objective of realising assets and paying the debt because, as it seemed to me, Mr Saha's estate would remain sequestrated and in the hands of the trustee. I accordingly called the parties to a case management hearing. 20 The case management hearing took place on 28 June 2021. The applicant and Mr Saha were both represented by counsel. I infer that counsel who appeared for Mr Saha was instructed by Pannu Lawyers who were then still on the record for him. I raised various queries with both counsel and was ultimately satisfied that the parties had considered their respective positions and genuinely agreed to their proposed course and that they believed that it would have the desired outcome. Counsel were united in seeking a stay of the sequestration order. 21 I was well aware that in the context of an appeal from a sequestration order the court has no power to order a stay of the sequestration order, but only to order that proceedings under the sequestration order be stayed. That is because a sequestration order takes effect immediately it is made; the debtor immediately becomes a bankrupt, and their property immediately vests in the trustee in bankruptcy. Those are the effects of ss 43(2) and 58(1) of the Bankruptcy Act. Section 52(3) of the Bankruptcy Act provides that the court may stay all proceedings under a sequestration order for a period not exceeding 21 days, but it does not provide the power to stay a sequestration order. Also, under s 37(2) the court does not have power to suspend the operation of a sequestration order. I had discussed this issue not long before in Du Bray v ACW [2020] FCA 1142 at [4]-[11] where I had cited Endresz v ASIC [2014] FCA 1139 at [8]-[11]. 22 However, the jurisdiction of the court in this case is exercised under s 35A of the Federal Court of Australia Act 1976 (Cth) (FCA Act) in review of a decision of a registrar under delegated power which decision is regarded as having been made subject to being able to be reversed or otherwise corrected by a judge on review. The right to seek review attaches to the delegation to the registrar and is an attribute of the nature of the delegated authority. If the review process is validly invoked in respect of an order made by a registrar, there is the possibility that by subsequent decision of a judge of the Court a different order will be made in place of the existing order. In effect, the delegated exercise of power is undone or revoked and a decision by a judge is made in its place. If there is a concern about steps being taken by parties based upon the order that has been made in the exercise of delegated power then interim relief could be sought pending the outcome of the review. See Bechara v Bates [2021] FCAFC 34; 388 ALR 414 at [1]-[6] per Allsop CJ, Markovic and Colvin JJ. 23 Section 35A(6) of the FCA Act provides that the court may, on application under sub-s (5) or of its own motion, review the exercise of power by a registrar and make such order or orders as it thinks fit in the matter with respect to which the power was exercised. It was held in Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574; 98 FCR 447 at [23] per Beaumont, Burchett and Hely JJ that s 35A(6) confers the power, in the context of a review of a registrar's sequestration order, to stay such an order. It was under that Full Court authority that I made orders staying the sequestration order until 29 October 2021, listing the matter for hearing on that day and setting a timetable for the hearing. 24 As the events of this case demonstrate, which I will come to, I now doubt whether Weir is correct and whether as a matter of legal power or practicality a sequestration order made by a registrar can or should be stayed by a court in the exercise of its review power. That is however the law on current authority, and I applied it.

D. Accelerating the timetable 25 On 19 July 2021, Mr Saha filed an 'interim' application in almost exactly the same form as the interlocutory application he filed on 17 May 2021. His affidavit of that day explains why he was dissatisfied with the stay of the sequestration order: The current consent orders of "stay orders of bankruptcy" hanging around is causing serious trouble with banks, real estate, and other financial aspects, which are not acceptable practically. The Trustee actions have blocked my Westpac bank account, mortgage payments from months of May-2021 onwards and continuing. Now the Collection department's staffs of bank are speaking to me very confused, as they are waiting for the Court appointed Trustee instructions to lift the account block, without any response. This is serious problem. The appointment of the Trustee serves no purpose or benefits to our opponents. The real estate staffs are also confused and in panic from instructions from Trustee, which have not been removed yet. The Trustee disrupted the scheduled auction sale of my Bossley Park house on 19-June-2021, which was organised before current proceedings had begun. This is a disaster. 26 Contrary to what Mr Saha asserts, it is not clear that the trustee had any role in the disruption of the scheduled auction of the Bossley Park property. The trustee consented to the stay order and thereafter adopted the position that he should do nothing so long as the sequestration order was stayed. In fact, it was Mr Saha who by email on 9 June 2021 directed the estate agent to "stop work for sale for property … until next Court Hearing is completed." 27 On 20 July 2021, Pannu Lawyers filed a notice of intention to cease to act for Mr Saha. 28 A case management hearing was listed for 27 July 2021. Mr Saha appeared personally. He reiterated some of the concerns set out in his affidavit and that he "cannot function normally". The essential point was that he was not able to realise assets to pay the applicant's debt because his assets were under the control of his trustee. Mr Saha sought that his application for review of Registrar Morgan's sequestration order be heard as quickly as possible. I accordingly made orders vacating the previous programming orders and hearing date and bringing the application on for hearing as soon as was possible.

E. Applicable principles 29 With reference to Bechara at [27], the nature of a hearing by way of review of a sequestration order in bankruptcy made by a registrar is as follows: (1) The application for review leads to a hearing de novo of the creditor's petition. (2) The hearing (or rehearing) of the creditor's petition is not prosecuted by the debtor (applicant for review) but by the creditor in the proceeding in which the registrar's order was made. (3) The application for review is a demand that the claim for relief (the sequestration order) be heard by a judge. (4) The onus is upon the creditor to prosecute its petition. The only onus of the debtor/bankrupt against whose estate a sequestration order has been made is to prove either solvency or any other sufficient cause under s 52(2) of the Bankruptcy Act. 30 To those principles can be added the following (from Totev v Sfar [2008] FCAFC 35; 167 FCR 193 at [13]-[15] per Emmett J citing Harris v Caladine [1991] HCA 9; 172 CLR 84 at 124, cited with approval in Bechara at [21]): (1) The judge reviewing the order begins afresh and exercises for himself or herself any discretion exercised by the registrar. The parties commence the proceeding again, subject to any rules concerning the use of evidence adduced before the registrar. The hearing de novo involves the exercise of the original jurisdiction and the petitioner, in the case of a bankruptcy petition, must start again, call witnesses and make out the petitioner's case. (2) The judge who hears the review application must hear the petition afresh and must be satisfied as to the matters referred to in s 52 of the Bankruptcy Act. Thus, the reviewing judge must herself or himself be satisfied with the proof of: the matters stated in the petition; the service of the petition; and the fact that the debt or debts on which the petitioning creditor relies is or are still owing. (3) The reviewing judge must also exercise afresh the discretions conferred by s 52(2). (4) Unless the Federal Court (Bankruptcy) Rules 2016 (Cth) are waived, the judge must have the affidavits referred to in r 4.06 of the Bankruptcy Rules, which must be sworn shortly before the hearing. Except in the case of a review on the same day as the sequestration order was made, the affidavits relied upon before the registrar would not satisfy r 4.06. 31 Section 52(1) of the Bankruptcy Act provides that the Court may make a sequestration order against the estate of a debtor if it is satisfied with proof of: (1) the matters stated in the petition; (2) the service of the petition; and (3) the fact that the debt or debts on which the petitioning creditor relies is or are still owing. 32 The requirement that the creditor prove that the debt relied upon is still owing will ordinarily be easier to fulfil in respect of a judgment debt, the judgment being prima facie evidence of the debt. The Court nonetheless has the power to go "round the judgment", to enquire into its subject matter, so as to satisfy itself that the creditor's petition is founded on a "good debt": Shaw v Yarranova Pty Ltd [2017] FCAFC 88; 252 FCR 267 at [16]. 33 The petitioning creditor has a prima facie right to a sequestration order once proof of the matters required by s 52(1) has been satisfied: Cain v Whyte [1933] HCA 6; 48 CLR 639 at 646 and 648; Rozenbes v Kronhill [1956] HCA 65; 95 CLR 407 at 414. 34 Nevertheless, the court retains a discretion to refuse such an order if the debtor is able to pay their debts (s 52(2)(a)) or for "other sufficient cause" (s 52(2)(b)). The onus is on the debtor, Mr Saha, to establish either or both of the preconditions. The circumstances which may constitute "other sufficient cause" are variable, and it is inappropriate to catalogue or circumscribe them: Clyne v Deputy Commissioner of Taxation (1985) 5 FCR 1 at 5 per Fisher, Morling and Wilcox JJ; Liang v LV Property Investments Pty Ltd [2015] FCA 1057 at [52]. 35 Even if "other sufficient cause" has been shown, that merely enlivens the court's discretion to refuse to make a sequestration order. The power in s 52(2) is permissive, not mandatory. Even if a debtor can bring himself or herself within s 52(2)(b), that does not entitle him or her to have a sequestration order refused: Endresz v ASIC (No 2) [2015] FCAFC 33; 228 FCR 334 at [37] per Edmonds, Gordon and Beach JJ; Russell v Polites Investments Pty Ltd [2012] FCA 11 at [24]; Liang v LV Property Investments Pty Ltd [2015] FCA 1057 at [53].

F. The formal requirements 36 I am satisfied that the requirements of each of the paragraphs of s 52(1) of the Bankruptcy Act have been met. The applicant has also satisfied the formal requirements of Pt 4 of the Bankruptcy Rules. There was no dispute in that regard. Mr Taylor has confirmed in writing his willingness to be appointed trustee. The focus thus shifts to Mr Saha's grounds of opposition.

G. The grounds of opposition 37 Mr Saha's grounds of opposition can be summarised as follows: (1) The strata manager failed to do certain things that it should have done including providing copies of levies to Mr Saha in time or provide an explanation in the statement of claim filed in the Local Court. (2) The strata manager pocketed or misappropriated the payment received from an insurance claim related to Mr Saha's cross-claim in the Local Court. (3) The original statement of claim in the Local Court was for an unexplained amount of unpaid levies of $1,914.81. The costs assessor however ignored s 60 of the Civil Procedure Act 2005 (NSW) which provides that the practice and procedure of NSW courts should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute. (4) It is a travesty of justice that the District Court orders in a particular proceeding were unfairly suppressed. 38 From the affidavits filed by or on behalf of Mr Saha and from his submissions, additional grounds of opposition can be identified. They essentially resolve into a contention that he is solvent (i.e., in reliance on s 52(2)(a)), or that there is "other sufficient cause" (s 52(2)(b)) based on evidence with regard to his assets which, if realised, would readily pay his debts. In effect, the contention is that the applicant's agreement to the stay of the sequestration order for 120 days failed to achieve the purpose of Mr Saha being able to realise some assets to pay the debt failed. It failed because the fact of the sequestration made it impossible for Mr Saha to realise assets and there is now sufficient cause for the sequestration order to be set aside to enable him to realise assets and pay the debt.

H. Grounds 1-4: going behind the judgments 39 The applicant relies on judgment debts underlying the bankruptcy notice. I am required to be satisfied of the existence of the debts. Usually, a determination after a contested hearing which results in a judgment will provide a practical guarantee of reliability that will mean that the court will not go behind the judgment. If the court is persuaded to go behind the judgment or order then it will investigate the debt upon which the petition is based. For a creditor's petition to be dismissed on the basis that in truth and reality there is no debt behind the judgment, there must be a proper basis to exercise the discretion to go behind the judgment and an assessment that, in truth and reality, there is no debt. See Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132 at [16], [37]‑[38], [65]‑[71] per Kiefel CJ, Keane and Nettle JJ; Lowbeer v De Varda [2018] FCAFC 115; 264 FCR 228 at [53] per Reeves, Farrell and Colvin JJ. In order to justify going behind the judgment, there must be substantial reasons for doubting whether there is in truth and reality a debt due to the petitioning creditor: Ramsay Health Care at [20], [37]-[38], [47], [54], [65] and [111]-[112]. 40 The grounds of opposition 1 to 4, and the evidence supporting them, do not give rise to substantial reasons for doubting that behind the judgments on which the applicant relies there is in truth and reality a debt due to the applicant. The evidence, such as it is, is essentially conclusionary and makes a series of unsubstantiated and scattergun allegations. It is difficult to make sense of much of it. There is insufficient evidence there to raise any real question or doubt as to the debts behind the judgments. 41 In the circumstances, I am satisfied that the applicant relies on true debts.

I. Solvency and "other sufficient cause" 42 It is convenient to consider Mr Saha's contention that he is solvent as well as whether there is "other sufficient cause" not to make a sequestration order together. That is because in this case the question of "other sufficient cause" is closely related to the question of solvency. 43 By ss 5(2) and (3) of the Bankruptcy Act, a person is solvent if, and only if, they are able to pay all their debts as and when they become due and payable, and a person who is not solvent is insolvent. 44 However, consideration of solvency is not limited to the debtor's own monies and cash resources immediately available. There should also be consideration of monies which the debtor can procure by realisation by sale or by mortgage or pledge of their assets within a relatively short time - relative to the nature and amount of the debts and to the circumstances. The conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor's inability, utilising such cash resources as they have or can command through the use of their assets, to meet their debts as they fall due which indicates insolvency. See Sandell v Porter [1966] HCA 28; 115 CLR 666 at 670. 45 The onus lies on the debtor to prove their solvency. To do so, the following principles apply (with reference to Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728 at [44], approved in Expile Pty Ltd v Jabb's Excavations Pty Ltd [2003] NSWCA 163; 45 ACSR 711 at [16] per Santow J, Meagher and Handley JJA agreeing, in an analogous context): (1) In order to discharge that onus the court should ordinarily be presented with the "fullest and best" evidence of the financial position of the respondent: Commonwealth Bank of Australia v Begonia (1993) 11 ACLC 1075 at 1081. (2) Unverified claims of ownership or valuation are not ordinarily probative of solvency. Nor are bald assertions of solvency. (3) There is a distinction between solvency and a surplus of assets. A person may be at the same time insolvent and wealthy. The nature of a person's assets, and their ability to convert those assets into cash within a relatively short time, at least to the extent of meeting all their debts as and when they fall due, must be considered in determining solvency. 46 Mr Saha has tendered title searches which establish that he owns four properties in New South Wales and one in Queensland. All the properties have registered mortgages, with one of them having three mortgages, another two mortgages and one a mortgage and a caveat. 47 Mr Saha has by way of affidavit put up a balance-sheet as follows (extracted without amendment): Item no. Description Estimated Value{$) Liability Net estimate d value {$) ($) 1 3/81 Hampden Rd, Lakemba NSW 2195 ("Lakemba Property") 360,000 153,571 206,429 2 629 Polding Street, Bossley Park NSW 2176 ("Bossley Park Property") 600,000 399,514 200,486 3 16 Aberdeen Road, Busby, NSW 2168 ("Busby Property") 500,000 145,518 354,482 4 36 Maxwells Avenue, Ashcroft NSW 2168 ("Ashcroft Property") 500,000 293,929 206,071 5 11/460 Ann Street, Brisbane Qld 4000 ("Brisbane Property") 360,000 158,078 201,922 6 Funds in bank accounts (Westpac and ANZ) 6,213 6,213 7 Personal Flexi Loan (Westpac) 38,601 -38,601 8 GWR Real Estate NIL 9 Toyota Prius C 2015 ("Car") 15,000 15,000 10 Household Contents 1,000 1,000 11 AMEX Credit Card 7,941 -7,914 12 Coles Mastercard 15,162 -15,162 13 BT Super 1,069.15 1,069.15 Total net assets E $1,130,995

48 On the face of it, that balance sheet shows considerable net assets over liabilities. However, there are some significant difficulties with it. 49 First, there is no admissible evidence of the value of the properties. I limited Mr Saha's statements as to estimated value of the properties under s 136 of the Evidence Act 1995 (Cth) as being evidence only of his subjective belief and understanding. There is no evidence qualifying Mr Saha as an expert on valuing real property or otherwise providing a basis to admit his opinion on the values of the properties. He tendered some internet searches from a publicly accessible website called CoreLogic, but they are also not evidence of the value of the properties. Purported statements of fact in them as to previous sales of the properties are inadmissible hearsay, and the "automated valuation estimates" that they purport to give in respect of each property are inadmissible statements of opinion. 50 Secondly, there is no proper evidence of the debts on each property - there are no bank statements or other business records reflecting the amounts that Mr Saha says are the liabilities. All that is before me is his say-so on the liabilities. 51 Thirdly, there is evidence from the trustee of unsecured creditors whose debts are not reflected in the balance sheet presented by Mr Saha. Although there are other smaller debts, the unreflected debts notably include the sum of $29,392.50 to the Office of State Revenue NSW. There is also evidence of a debt of $14,240 to Assetline Investments Pty Ltd which is secured by the caveat on one of the properties but which is not identified in the balance sheet. The omission of those debts casts some doubt on the reliability of the list of debts in his balance sheet. 52 Fourthly, there is the difficulty with regard to how quickly any assets might be able to be realised in order to meet his debts. There is no evidence before me on how long it will take to sell any of the properties. Mr Saha said in argument that it would take "three months to four months or something like that", but he also explained that when arrangements had previously been made to sell the Bossley Park property it had taken several months to prepare it for auction. In any event, Mr Saha has had ample opportunity to sell a property and pay the debt but has failed to do so, from which I infer that he is unable or unwilling to do so. In that regard, the bankruptcy notice was served in June 2020 and the creditor's petition in March 2021, but even on those occasions nothing meaningful was apparently done to realise assets to pay the debt. As pointed out in Trojan v Corporation of Hindmarsh [1987] FCA 276; 16 FCR 37 at 48, a sterile demonstration of an ability to achieve payment which was not in reality likely to occur, may still result in a sequestration order. 53 In the circumstances, Mr Saha has not satisfied me that he is solvent. In reaching that conclusion I take into account that Mr Saha was self-represented before me, although I note that at the time he filed his review application he was represented and his solicitor put up an affidavit seeking to establish his solvency. 54 There is also the consideration whether the fact that the parties agreed a regime which was aimed at giving Mr Saha a 120 day grace period to sell one of the properties and pay the debt, and the fact that he failed at least in part because the stay of the sequestration order frustrated his ability to sell the property, amounts to "other sufficient cause" not to make a sequestration order. This question has weighed with me, but ultimately I am not persuaded that it is a proper basis not to make a sequestration order. The principal reason for that is because of the evidence, referred to earlier, that although he faced other external obstacles it was Mr Saha himself who instructed the real estate agent to stop work on the sale. Mr Saha has also had a considerable amount of time prior to that grace period to sell a property or find a way to pay the debt, and he has not done so. That means that I cannot have confidence that if no sequestration order is made Mr Saha will take the necessary steps to quickly sell the property. Another reason is that the applicant specifically did not agree to the sequestration order being set aside; it wished to retain the advantage of maintaining a sequestration order in its favour. 55 Finally, it may be sufficient cause in some circumstances for refusing to make a sequestration order and dismissing a petition that a judgment creditor has equally good and available facilities for enforcing its judgment. It is for the court in its discretion to decide whether such a sufficient cause has been established and in exercising this discretion it must consider the relevant facts and circumstances. The question is whether the creditor was justified in taking the bankruptcy proceeding against the debtor. See Re Noye; Ex parte Deputy Commissioner of Taxation (Cth) (1956) 18 ABC 77 at 78. It has also been observed that although there may be speedier, cheaper and more effective remedies open to the petitioning creditor to secure payment of its debts than pursuing bankruptcy proceedings, the petitioning creditor is not bound to pursue them: Re Poulson; Ex parte Hempenstall Bros Ltd (No 1) (1929) 1 ABC 54 at 59. See Re Sanders v Sanders [2003] FCA 1079 at [47]. 56 The difficulty for Mr Saha is that he has not shown that execution of judgment by the judgment creditor in the usual course against one or more of his properties would realise sufficient money to pay the debt. The judgment creditor would have to investigate the circumstances of each property, its value and any secured claims in respect of the property before being in a position to know whether execution would be worthwhile. That is not a process that the judgment creditor is obliged to follow before bringing bankruptcy proceedings. 57 As it was said in Australia & New Zealand Banking Group Ltd v Foyster [2000] FCA 400 at [17]: The onus of proving sufficiency of assets lies on the respondent. It is not sufficient for the respondent simply to establish that he has assets which exceed his liabilities in value. It must also be established that the assets are available to be realised and that they are capable of ready realisation. If a debtor is able to pay his or her debts, but is recalcitrant, the creditors may resort to other remedies, such as execution against property and garnishee proceedings, but not to sequestration. Bankruptcy is not a proceeding designed for the recovery of debts: see Re Sarina; Ex Parte Wollondilly Shire Council (1980) 32 ALR 596, 599. 58 For the reasons given above, even if Mr Saha was able to pay his debts but was recalcitrant, other means of execution were not reasonably feasible for the applicant in the circumstances. Accordingly, I am not satisfied that the applicant was unreasonable in bringing a creditor's petition rather than pursuing other execution remedies. There is thus no "other sufficient cause" to refuse the sequestration order.

J. Orders 59 In the circumstances, the application for review of the orders of Registrar Morgan on 29 April 2021 should be dismissed and the registrar's orders should be affirmed. See Bechara at [152]. 60 The applicant should have its costs from the respondent's estate. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.