Bolt v Gradara

[1999] FCA 550

FEDERAL COURT OF AUSTRALIA

Bolt v Gradara [1999] FCA 550

BANKRUPTCY – sequestration – bankruptcy notice founded on a judgment debt – whether court should go behind that judgment

Bankruptcy Act 1966 (Cth) s 52

WENDY BOLT AND SHARNEY BYRNE  V  TARCISIO GRADARA

NO. V 7102 OF 1999

JUDGE:         FINKELSTEIN J
PLACE:         MELBOURNE

DATE:           26 APRIL 1999

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 7102 OF 1999

BETWEEN:	WENDY BOLT and SHARNEY BYRNE Applicants
AND:	TARCISIO GRADARA Respondent
JUDGE:	FINKELSTEIN J
DATE OF ORDER:	26 APRIL 1999
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.        A sequestration order be made against the estate of Tarcisio Gradara.

2.The applicants’ costs of and incidental to the petition, including reserved costs, be taxed and paid according to statute.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 7102 OF 1999

BETWEEN:	WENDY BOLT and SHARNEY BYRNE Applicants
AND:	TARCISIO GRADARA Respondent

JUDGE:	FINKELSTEIN J
DATE:	26 APRIL 1999
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. Ms Wendy Bolt and Mr Sharney Byrne petition for the sequestration of the estate of Tarcisio Gradara.  They found their petition upon the failure of Mr Gradara to comply with a bankruptcy notice which required him to pay, or make an arrangement for the settlement of, a debt of $6,906.  The debt represented the assessed costs of an appeal in this court. 

2. Mr Gradara opposes the making of the sequestration order.  He appears in person to contest the petition.  Without the benefit of legal assistance his task has not been an easy one.  Nevertheless, based partly on the evidence that has been filed and partly on what I have been told in court, I believe that I have a sufficient grasp of the facts to enable me to deal adequately with Mr Gradara's submissions. 

3. The dispute with the petitioning creditors dates back to 1984.  Mr Gradara had been involved in a motor vehicle accident and instructed solicitors to act on his behalf in proceedings to recover damages for the loss that he sustained.  The proceedings were compromised and the settlement sum, I believe it was $15,000, was paid into the solicitor's trust account with the State Bank of Victoria.

4. On 13 August 1994 a cheque in the sum of $13,500 payable to Mr Gradara was drawn on the solicitor's trust account.  The cheque was taken to a branch of the State Bank where Ms Bolt was employed as a teller.  The cheque was cashed and out of the proceeds Mr Gradara received $10,000 and his solicitor retained $3,500, presumably on account of his costs. 

5. Mr Gradara is of the opinion that his solicitor has misappropriated $3,500.  He instituted proceedings for the recovery of the money and those proceedings were not successful.  He repeated his complaint to the Victoria Police and as a result the solicitor was charged with a number of offences.  Those charges were either dismissed or withdrawn.

6. Mr Gradara then turned his attention to the petitioning creditors.  (Mr Byrne was the manager of the branch of the State Bank where the cheque had been cashed.)   Mr Gradara instituted proceedings against the petitioning creditors in a number of state courts but was unsuccessful in obtaining relief. 

7. Mr Gradara then commenced proceedings against the petitioning creditors in this court alleging against them a criminal conspiracy contrary to certain provisions of the Crimes Act 1914 (Cth).  On 1 August 1997 that proceeding was dismissed on the ground that it disclosed no reasonable cause of action.  An appeal was taken to the Full Court which was also dismissed with costs.  It is those costs which, when taxed, found the petition.

8. In its reasons for decision the Full Court said that the causes of action articulated by Mr Gradara in his application and supporting affidavit were based on statutory provisions that concerned conspiracies to defraud the Commonwealth, or a public authority of the Commonwealth, and had no relevance to conspiracies to defraud a private citizen.  The Full Court went on to say that even if Mr Gradara's claim could be construed as alleging a common law conspiracy against the petitioning creditor, it was bound to fail because it was statute barred.

9. Mr Gradara says the petition should be dismissed for a variety of reasons.  Some go to the circumstances in which his claim was dismissed by the Full Court.  Others go to the merits of his claim against the petitioning creditors.  He also relies upon the merits of his claim against his former solicitor. 

10. Section 52(1) of the Bankruptcy Act provides that upon proof of the matters set out in that subsection, being the matters stated in the petition, the service of the petition, and the fact of the debt upon which a petitioning creditor relies is still outstanding, the court may make a sequestration order.  But even if those matters are proved, the court nevertheless retains a discretion to dismiss the petition.  By subsection 52(2) that discretion may be exercised if it is shown that the debtor is able to pay his debts or for other sufficient cause a sequestration order ought not be made.

11. Further where a petition is founded on a judgment debt the court can go behind that judgment to satisfy itself whether there is a real debt.  But of course there must be substantial reasons for questioning whether or not there is a real debt.  Thus, a court may go behind a judgment debt if it is shown that there has been some fraud or collusion or where it appears that there has been some miscarriage of justice. 

12. Whether Mr Gradara has suffered any injustice at the hands of his former solicitor is not for me to say, save to observe that other courts have taken the view that he has not.  What is important for present purposes is that Mr Gradara has suffered no injustice by reason of the conduct of the petitioning creditors in this court in the proceedings that led to the making of the costs order.  In relation to those proceedings, the petitioning creditors acted within their rights when they successfully obtained a dismissal of the claim brought against them.  When he appealed that decision, Mr Gradara assumed the risk of having an order for costs made against him in the event that his appeal was unsuccessful.  He was undoubtedly aware of that risk.

13. I accept that Mr Gradara considers, and has always considered, that he has a good claim against the petitioning creditors and that it was wrong that his claim against them was dismissed without a hearing on the merits.  But that is really beside the point.  The incontrovertible fact here is that the proceeding that Mr Gradara brought against the petitioning creditors in this court was bound to fail, as was his appeal to the Full Court.  There is no injustice in allowing the petitioning creditors to base and prosecute their petition on a costs order regularly made. 

14. Having established the matters set out in section 52(1) to my satisfaction, a sequestration order will be made against the estate of Mr Gradara.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate:

Dated:             26 April 1999

Counsel for the Applicants:	Mr J Nolan
Solicitor for the Applicants:	Herbert Geer & Rundle
Respondent in Person.
Date of Hearing:	26 April 1999
Date of Judgment:	26 April 1999