Federal Court of Australia Hradsky v Jeary [2022] FCA 809 File number(s): VID 743 of 2021 Judgment of: MCEVOY J Date of judgment: 8 July 2022 Date of publication of reasons: 12 July 2022 Catchwords: BANKRUPTCY AND INSOLVENCY – Sequestration order made by a registrar – Application made by respondent for review of sequestration order by a Judge – Review hearing de novo – Where the respondent failed to appear at the hearing and could not be cross examined – Evidence of the applicant preferred – Where it is not necessary to go behind the judgment debt – Where the respondent has failed to provide adequate evidence of his solvency – Requirements of s 52(1) of Bankruptcy Act 1966 (Cth) satisfied – Sequestration order made by registrar is affirmed. Legislation: Bankruptcy Act 1966 (Cth) ss 43, 52(1), 52(2) and 306(1) Federal Court Bankruptcy Rules 2016 (Cth) Cases cited: Bechara v Bates (2001) 286 FCR 166; [2021] FCAFC 34 Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132; [2017] HCA 28 Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 25 Date of hearing: 8 July 2022 Counsel for the Applicant: Mr Devanny Solicitor for the Applicant: Robert Wood and Associates Counsel for the Respondent: The Respondent did not appear ORDERS VID 743 of 2021 BETWEEN: ERICA HRADSKY Applicant AND: RYAN JEARY Respondent order made by: MCEVOY J DATE OF ORDER: 8 JULY 2022 THE COURT ORDERS THAT: 1. The applicant have leave to amend paragraph 1 of the creditors petition dated 10 December 2021 to read as follows: "The respondent debtor owes the applicant creditor the amount of $11,590.05 plus Interest and Costs for Order made by the Magistrates' Court at Ringwood dated 6 October 2021." 2. The requirements of re-verification and re-service of the creditors petition be dispensed with. 3. The sequestration order made 3 February 2022 is affirmed. 4. The applicant creditor's costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. EX TEMPORE REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) MCEVOY J: 1 This is a hearing of an application dated 24 February 2022 and filed 4 March 2022 by which Mr Jeary, the respondent, seeks review of the decision of a registrar dated 3 February 2022 sequestrating his estate. 2 It is to be noted that Mr Jeary, having been informed by my chambers on 24 May 2022, 27 June 2022 and 5 July 2022 that his application remains listed for hearing today, has not appeared. Nor has he filed any affidavit material or outline of submissions as ordered by Murphy J on 8 March 2022. Counsel for the applicant creditor has submitted that notwithstanding the non-appearance of Mr Jeary, the review application must proceed in his absence. The applicant submits that Mr Jeary has had the opportunity to appear and file material and that he has failed to do so. It is said that by so failing he is unable to discharge the burdens that rest on him insofar as his application is concerned. 3 Noting generally the observations of the Full Court of this Court in Bechara v Bates (2001) 286 FCR 166 ("Bechara v Bates") as to the nature of the review of the decision of a registrar in the present context, and having regard to the helpful written submissions and other material filed by the applicant, in my view it is appropriate that notwithstanding Mr Jeary's non-appearance his application proceed today in his absence: Bechara v Bates at [61]. The Court has therefore heard the application for review in the absence of Mr Jeary. 4 Where reference is made in these reasons to particular things having occurred, I am to be taken as being satisfied of the relevant matters by reference to affidavits or other documents filed in the proceeding and which have not been disputed in any effective way by Mr Jeary. 5 On 13 December 2021 the applicant presented a creditor's petition seeking a sequestration order under s 43 of the Bankruptcy Act 1966 (Cth) ("the Act") against the estate of the respondent. 6 The creditor's petition relied on the act of bankruptcy of the respondent in failing to comply with the bankruptcy notice issued by the Official Receiver on 29 October 2021 and served personally on Mr Jeary by Mr Stephen Freer on 8 November 2021 at or about 10.52 am, at 40 Betula Avenue, Vermont, Victoria ("the Vermont property"). 7 The creditor's petition was also served by Mr Freer at the same address on Thursday 16 December 2021. In the affidavit of Mr Freer, sworn 16 December 2021, he states that: [The respondent] refused to take the documents from my hand, therefore I left the documents in his presence, informed him of the contents thereof, and confirmed he had been personally served. The respondent is highly evasive and abusive. 8 The creditor's petition was listed for a hearing before a registrar on 20 January 2022, and was adjourned administratively by the registrar to be heard via Microsoft Teams on 3 February 2022. Mr Jeary was ordered to appear at the adjourned hearing if he wished to oppose the making of the sequestration order. 9 Notice was provided to Mr Jeary in accordance with the orders of the registrar. Having regard to certain matters to which I will come, it is nonetheless correct to say that no appearance was made by Mr Jeary, and as has been mentioned a sequestration order was made by the registrar on 3 February 2022. 10 On 4 March 2022 Mr Jeary filed an affidavit, together with the interim application, for a review of the registrar's decision. On 8 March 2022 Mr Jeary and his partner, Ms Freeman, sought a series of directions from Murphy J. This included that they be permitted to file further affidavit material and an outline of submissions. As has been mentioned, Mr Jeary has failed to comply with Murphy J's orders made that day, and he has filed nothing since. 11 In Bechara v Bates at [27], the Full Court explained authoritatively the principles which apply to a hearing by way of a review of a sequestration order in bankruptcy made by a registrar: (a) The application for review leads to a hearing de novo of the creditor's petition. (b) 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. (c) The application for review is a demand that the claim for relief (the sequestration order) be heard by a judge. (d) 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 1966 (Cth). (e) An appreciation of the above considerations makes it evident that summary or default judgment terminating an application for review is highly likely to be misconceived and founded upon a misconception that the applicant for review has an onus to prosecute an application or to show error in the approach of the registrar. 12 As such, and as the applicant accepts, the obligation is on her to present her petition. The only affidavit material filed by Mr Jeary is an affidavit dated 1 March 2022 and filed 4 March 2022. Mr Jeary alleges in that affidavit that he was not served with material by the applicant, despite affidavit material having been filed by Mr Freer deposing to the contrary. Mr Freer has been made available for cross-examination on his affidavits, however in circumstances where Mr Jeary has not attended this morning, cross-examination has not occurred. 13 Mr Jeary also asserts a deficiency in the petition owing to a typographical error in it. He notes that the Magistrates Court order was made on 6 October 2021, and the certified extract attached to the petition incorrectly states the date as 16 October 2021. I accept that this error does not cause Mr Jeary any substantive injustice which cannot be remedied by an order of the Court: see s 306(1) of the Act. The applicant seeks an order to amend the petition and dispense with the requirement to re-verify it. I am satisfied that an order in these terms should be made. 14 Mr Jeary further asserts that there is to be a future application for a rehearing in the Magistrates Court of that proceeding. He also asserts no prior knowledge of the Magistrates Court proceedings, and that he is solvent. 15 In accordance with s 52(1) of the Act, the applicant is required to prove the following: (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. 16 Subject to an amendment of the typographical error in paragraph 1 of the applicant's creditors petition dated 10 December 2021 as previously mentioned, the applicant submits, and I accept, that the Court should rely on the affidavits filed, including the affidavit of debt which was to be filed as close as possible to the hearing in accordance with the Federal Court (Bankruptcy) Rules 2016 (Cth), in accepting the petition. I note that on 6 July 2022 the applicant herself filed a further affidavit as to the existence of the debt, and on 8 July 2022 Ms Newett filed an affidavit of search indicating that there were no details of a debt agreement, about the debt on which the applicant relies, in the National Personal Insolvency Index on the day when the petition was presented, and on the day when the search was made. I am satisfied as to these matters. 17 In his affidavit of 1 March 2022 Mr Jeary asserted baldly that he was solvent. However, on 19 May 2022 Mr Jeary's trustee in bankruptcy provided a report as to affairs detailing some $436,934 worth of liabilities to creditors, including the applicant. The trustee refers to Mr Jeary being the registered proprietor of property at 4 Poplar Grove, Langwarrin, Victoria, jointly with Ms Freeman. It is not clear whether all of Mr Jeary's creditors have been advised of this proceeding. 18 In any event, the Court cannot be satisfied, without the fullest and best evidence of solvency provided by Mr Jeary, that he is able to pay his debts in accordance with s 52(2) of the Act. As the applicant submits, the burden to satisfy the Court of this is on Mr Jeary. His absence today and his failure to file probative material in relation to this issue means that he has failed to discharge this burden. 19 In his affidavit of 1 March 2022 Mr Jeary makes various comments concerning the Magistrates Court judgment. That judgment was entered in default, and was for gardening services provided by the applicant to Mr Jeary in relation to the sale of the Vermont property. 20 I accept, as the applicant submits, that the Court should decline to exercise its discretion to look behind the Magistrates Court judgment: Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132 at [68]. The applicant was available to give evidence as to the circumstances that gave rise to the claim which resulted in the default judgment, but in the face of Mr Jeary's non-appearance it was unnecessary for her to do so. In any event, it is for Mr Jeary to prove some problem with the Magistrates Court judgment, which he has not done. 21 There is one ancillary matter arising. The applicant contends that she now knows, having been provided with the trustee's report and by conducting a title search which details a series of warrants over the Vermont property, that Mr Jeary sold that property to arm's length third parties on 12 January 2022 (the actual date appears to have been 13 January 2022). Accordingly, although there was compliance with the order of the registrar on 20 January 2022 to post the order of that date to the last-known address of the respondent, unless the respondent had mail redirection in place, it may be that he would not have received it, having already moved. 22 The applicant says, however, that as this matter has been brought before the Court by way of a de novo review of the registrar's decision, even if Mr Jeary did not receive notice of that order at the time, and could not therefore have accessed the Microsoft Teams link to the hearing, as the registrar's decision is to be exercised afresh this operates to cure any defect which might otherwise have arisen. In all the circumstances, I accept that this is the case. 23 In summary I accept, as the applicant submits, that Mr Jeary did live at 40 Betula Avenue, Vermont, Victoria, on 8 November 2021 and on 16 December 2021. I accept that Mr Freer's evidence is to be preferred, that Mr Jeary was served with the bankruptcy notice and the petition by him. It is plain that Mr Jeary has taken extensive steps to avoid his legal obligations in these proceedings and has attempted to ignore documents served on him. I accept also that he has ignored directions made in these proceedings to present arguments on review of the registrar's decision. 24 Accordingly, any further delay in administering Mr Jeary's bankrupt estate risks the dissipation of relevant assets and recoveries in the interests of all creditors, in addition to the applicant. 25 The sequestration order of 3 February 2022 will be affirmed. The orders I will make are as set out at the commencement of these reasons. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McEvoy. Associate: Dated: 8 July 2022