Carrafa v Gomez

[2016] FCCA 1397

FEDERAL CIRCUIT COURT OF AUSTRALIA

CARRAFA v GOMEZ & ANOR [2016] FCCA 1397

Catchwords:
BANKRUPTCY – application by trustee for declarations that certain transfers by bankrupt are void as against the trustee – funds frozen – application for release of part of funds to pay for litigation.

First Applicant: MICHAEL CARRAFA AS TRUSTEE OF THE BANKRUPT ESTATE OF KALAISELVI GOMEZ

First Respondent: IRWIN GOMEZ

Second Respondent: JNGO PTY LTD

File number: MLG 2624 of 2014

Judgment of: Judge Riley

Hearing date: 26 May 2016

Date of last submission: 26 May 2016

Delivered at: Melbourne

Delivered on: 26 May 2016

REPRESENTATION

Counsel for the applicant: Tim Sowden

Solicitors for the applicant: Zervos Lawyers

Advocate for the first respondent: Kristen Moore

Solicitors for the first respondent: Kennedy Guy

Advocate for the second respondent: Nathan Gomez

Solicitors for the second  respondent: None

ORDERS

1. The application in a case filed on 18 May 2016 be dismissed.

2. The costs of the application be reserved.

FEDERAL CIRCUIT
COURT OF AUSTRALIA AT
MELBOURNE

MLG 2624 of 2014

MICHAEL CARRAFA AS TRUSTEE OF THE BANKRUPT ESTATE OF KALAISELVI GOMEZ

Applicant

And

IRWIN GOMEZ

First respondent

And

JNGO PTY LTD

Second respondent

REASONS FOR JUDGMENT

(revised from the transcript)

1. This in an application to vary a freezing order made in the context of an application by a trustee in bankruptcy that certain transfers are void as against the trustee.  The application is made by the second respondent, JNGO Pty Ltd, which is represented by Mr Nathan Gomez, its sole director and shareholder.  The application is to obtain litigation funding to enable JNGO to be represented by a lawyer. 

2. The matter is listed for final hearing on 14 June 2016.  It has already been adjourned when a similar application was made by Mr Irwin Gomez, the father of Mr Nathan Gomez and the first respondent to the proceeding.

3. The essence of the claim is that the funds that are frozen belong to JNGO and, in accordance with the usual principle, the freezing order should exclude reasonable legal expenses.  However, the complication in this particular case is that Mr Nathan Gomez swore an affidavit on or about 27 November 2015 in which he said that the money that is frozen was not JNGO’s money but was a loan to JNGO from his father, Mr Irwin Gomez.

4. Mr Irwin Gomez also claims the money under an equity of exoneration.  That is what will need to be determined at final hearing.  The applicant, who is the trustee of the bankrupt estate of Ms Kalaiselvi Gomez (who is the wife of Mr Irwin Gomez and the mother of Mr Nathan Gomez), said that Ms Gomez has used various devices to conceal her assets from the trustee.

5. The first respondent, Mr Irwin Gomez, is now legally represented.  There are solicitors on the record who would be able to run the argument about the equity of exoneration on his behalf.

6. Given that Mr Nathan Gomez has said in an affidavit that the money that is frozen is a loan from his father to JNGO, it seems to me that JNGO does not have an interest in the money such as to warrant litigation funding being released for JNGO.

7. An application in similar terms was made in December 2015 when JNGO was represented.  At that point, the court was not satisfied that full disclosure had been made of JNGO’s financial circumstances.  It was envisaged at that point that JNGO would make a further application on proper material.

8. What has become apparent since then is that in addition to the frozen funds, JNGO had approximately $11,000 in another fund and another $9000 in a foreign exchange fund.  Mr Nathan Gomez told the court today that since 7 December 2015, those two amounts, totalling about $20,000, have been used for the legal expenses of Mr Irwin Gomez.  That is, JNGO’s money has been used to fund litigation being conducted by the father of a director of JNGO. 

9. Taking into account all the circumstances of this case, I do not consider that it would be proper to release funds to JNGO for it to use to fund the litigation.  The disclosure of JNGO’s financial affairs is still somewhat cloudy.  It was only in reply that Mr Nathan Gomez claimed that the $20,000 that JNGO had as at about 7 December 2015 has all been spent on the legal costs of his father, Mr Irwin Gomez.  That claim was not included in an affidavit. 

10. However, the primary reason for refusing the application is that the amount that is presently frozen, on the affidavit of Mr Nathan Gomez, is merely on loan to JNGO from Mr Irwin Gomez, who is the father of Mr Nathan Gomez, the director of JNGO.  It seems to me, with the benefit of the legal representation that Mr Irwin Gomez now has, that the relevant points will be able to be properly made at the trial of the proceeding. The application by JNGO will be dismissed. 

I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Judge Riley.

Date: 8 June 2016