Bempasciuto, F. v Burswood Management Ltd

[1990] FCA 540

Re: FRANCESCO BEMPASCIUTO
Ex Parte: BURSWOOD MANAGEMENT LIMITED and WESTERN AUSTRALIA TRUSTEES LIMITED
No. B 158 of 1990
FED No. 540
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
French J.(1)

CATCHWORDS

Bankruptcy - bankruptcy notice - application to set aside - notice based on taxed costs in legal proceedings - some costs ordered but not taxed before composition - contingent or future debts - excluded from composition - application dismissed.

Bankruptcy Act 1966 Pt.X

HEARING

PERTH

#DATE 5:10:1990

Mr F. Bempasciuto appeared on his own behalf.

Counsel for the Creditor: Mr. L.D. Ayres

Solicitors for the Creditor: Robinson Cox

ORDER

The application be dismissed.

The debtor pay the creditors' costs of the application.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

On 16 October 1987, in proceedings brought in this Court by Burswood Management Limited and Western Australia Trustees Limited under the Trade Practices Act 1974, Foster J. ordered, inter alia, that Francesco Bempasciuto pay the applicants' costs of the action. On 13 October 1989, the taxing officer certified those costs at $85,030.28. On 12 July 1990, a bankruptcy notice issued against Mr Bempasciuto making demand for payment of the costs plus interest in the amount of $8,475.07. The interest was claimed pursuant to s.52 of the Federal Court of Australia Act 1976. On 13 August, Bempasciuto made an application to the Court which was in substance an application to set aside the notice. It was based upon a prior composition with his creditors under Pt. X of the Bankruptcy Act 1966.

1. Following a decision by Bempasciuto and his wife in January 1986 to authorise a trustee to call a meeting of their creditors, a composition was approved by a special resolution of the creditors passed on 17 March 1986. It was in the following terms:
   

"That pursuant to the Section 204(1)(c) of the Bankruptcy Act 1966, the creditors accept in respect of Francesco Bempasciuto the following composition in full settlement and satisfaction of his debts:

1. The trustee of the composition shall be a person nominated by the creditors.

2. The debtor is to pay the sum of $20,000 jointly with Anna Marie Bempasciuto within 14 days of acceptance of the composition.

3. The trustee shall apply any moneys received by him in making payments to creditors of the joint and separate estates, if any, in the proportion that the creditors of the joint and separate estates respectively bear to the total creditors.

4. That the debtor will pay the trustee's remuneration."

In his statement of affairs filed 24 March 1986, Bempasciuto disclosed no contingent liabilities. On 15 May 1990, a resolution was passed by the creditors that the administration of the estate be concluded on lodging of final accounts with the Registrar in Bankruptcy.

1. Bempasciuto now says that the action which led to the making of the costs order started in 1985. A copy of the bill of costs for taxation disclosed that a substantial proportion of the costs claimed related to work done prior to the acceptance of the composition. It appears that an order for costs was also made against Bempasciuto and other respondents to the trade practices action on 21 February 1986. This, however, was not taxed until the taxation of the rest of the bill in October 1989.

2. The short answer to Mr Bempasciuto's application is that the composition which was accepted by his creditors in March 1986 had no impact upon the amounts for which he became liable pursuant to the taxation of costs. No debt arose until the costs were taxed, and that includes the costs which were ordered but not taxed on 21 February 1986. Assuming that some estimate was able to be made of those costs at that time, they were at best a future or contingent debt. While future or contingent debts and liabilities are provable in bankruptcy under s.82, they are excluded from the application of that section to the provisions of Pt. X of the Act relating to compositions. This follows from the modification of s.82 pursuant to s.243 of the Act and r.84 of the Bankruptcy Rules.

3. In the circumstances there is no basis for the application to set aside the bankruptcy notice and it will be dismissed with costs.