Fonua v MITROV

[2017] FCCA 2465

FEDERAL CIRCUIT COURT OF AUSTRALIA

FONUA v MITROV [2017] FCCA 2465

Catchwords:
BANKRUPTCY – Creditor’s petition – where Applicant claims the Respondent failed to comply with a bankruptcy notice – where Respondent did not so fail – no act of bankruptcy – where Respondent is solvent – creditor’s petition dismissed.

Legislation:

Bankruptcy Act 1966, s.52(2)

Federal Circuit Court Act 1999, s.104(4)(a)

Applicant: CRYSTAL ANN FONUA

Respondent: NIKOLA MITROV

File Number: MLG 830 of 2017

Judgment of: Judge Hartnett

Hearing date: 3 October 2017

Orders Made: 3 October 2017

Judgment Delivered at: Melbourne

Judgment Delivered on: 13 October 2017

REPRESENTATION

The Applicant: In Person

Counsel for the Respondent: Ms Hooper

Solicitors for the Respondent: Lou Castellano

ORDERS MADE 3 OCTOBER 2017

1. The creditor’s petition filed 26 April 2017 is dismissed.

2. The Applicant pay the costs of the Respondent as agreed and failing written agreement within seven days hereof, as taxed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 830 of 2017

CRYSTAL ANN FONUA

Applicant

And

NIKOLA MITROV

Respondent

REASONS FOR JUDGMENT

1. The Applicant filed a creditor’s petition on 26 April 2017.  Contained within that petition was an affidavit verifying the creditor’s petition as sworn on 24 April 2017 by the Applicant. That affidavit referred to a ‘paragraph 4’ of the creditor’s petition. The petition contained no paragraph 4.  

2. Thereafter, as conceded by the Respondent’s counsel, the Applicant filed all necessary affidavits as to service and all necessary affidavits as to a search conducted of the National Personal Insolvency Index, wherein there were no references in the index to the Respondent other than this petition, nor any details of a debt agreement, and as to the debt remaining outstanding. 

3. The affidavit as to debt, sworn on 2 October 2017, deposed to the amount of $27,656.72 owing by the Respondent to the Applicant under a judgment obtained in the Magistrates Court of Victoria at Geelong on 23 March 2017.  The Applicant claimed the said sum was still wholly due and unsatisfied.  The sum resulted from defective building works and was ordered by VCAT proceeding B766/2016 registered in the Magistrates Court of Victoria at Geelong, case number H10660349.

4. On the hearing of this matter the Applicant proceeded as a litigant in person.  The Respondent was represented by Counsel.  The Applicant’s solicitors had filed a “notice of withdrawal as lawyer” dated 26 September 2017.  The proceedings were referred to a Judge of this Court under s.104(4)(a) of the Federal Circuit Court Act 1999 (Cth) by Registrar Ryan on 3 August 2017. The Court determined, by orders made on 3 October 2017, that the creditor’s petition should be dismissed and a consequent costs order made.  The reasons for the making of those orders are contained in the paragraphs which follow herein.

5. The Applicant relied upon affidavit evidence as contained in affidavits sworn by her on 6 July 2017, 31 July 2017, 28 August 2017 and 29 September 2017. The Respondent relied upon affidavits of evidence sworn by him on 3 July 2017, 1 August 2017, 3 August 2017 and 25 August 2017.  The Respondent further relied upon an affidavit affirmed by Ms Olivia Pepper, a legal assistant in the employ of Lou Castellano Lawyers, the solicitors for the Respondent.  That affidavit went to the Respondent’s issuing of a subpoena to the Applicant’s husband, Mr Kohinoa Fonua, on 6 September 2017, which was returnable at 10.00am on 3 October 2017.

6. The issuing of such subpoena was foreshadowed by the Respondent in a notation to the Court orders made on 29 August 2017.  On that day the Court made orders as follows:-

   “(1) The creditor’s petition hearing is adjourned to 3 October 2017 at 10.00am.

   (2) Costs of this day are reserved.

   AND THE COURT NOTES THAT:

   A. The Respondent will issue a subpoena to the Applicant’s husband to require his attendance and production of relevant documents on the adjourned date in the event the matter has not resolved.”

7. The Respondent also relied upon a notice stating grounds of opposition to the application on 4 July 2017.  Those grounds are as follows:-

   “1. No act of bankruptcy: the Respondent complied with the requirements of a bankruptcy notice served on him on or around 24 March 2017 by making arrangements to the creditor’s satisfaction within 21 days of service for settlement of the debt;

   2. Creditor’s petition defective: the creditor’s petition is defective in that: 

   a) the petition overstates the quantum of the debt owing by the Respondent to the Applicant as at the date it was filed by $10,000; and

   b) the affidavit in support is defective insofar as the reference to paragraph 4 of the petition therein is in error, there being no such paragraph in the petition.

   3. Solvency:  the Respondent is in any event in a position to repay the balance of the debt owing to the Applicant within approximately four to six weeks.” 

8. Each of the parties in the proceeding relied upon their affidavit evidence and evidence given orally.  The parties were each cross-examined. 

9. Statements of fact in these reasons are findings of facts on the balance of probabilities. 

Background

1. The Applicant purchased a real property on which a house was situated in 2010. The Respondent, a licenced builder, constructed the house. In 2016 the Applicant issued proceedings in the Victorian Civil and Administrative Tribunal (‘VCAT’) against the Respondent in respect of some defects in respect of the house building. On 9 March 2017 the Applicant registered a VCAT judgment against the Respondent in the Magistrates Court of Victoria in connection with that building work (‘the Judgment’).

2. The Judgment required the Respondent to pay to the Applicant the earlier referred to sum of $27,656.72.  On 24 March 2017 the Applicant served the Respondent with both a document evidencing registration of the Judgment in the Magistrates Court and a bankruptcy notice issued on 22 March 2017 in respect of the debt the subject of the Judgment.   

3. Although this is disputed by the Applicant, the Court finds that at the time of service of the bankruptcy notice upon the Respondent (being at his home), the Respondent indicated to the Applicant she should attend at his home on the following Saturday at 2.00pm to collect the sum of $10,000 in part payment of the debt. The Respondent further stated that he would, by the end of the month, make two further payments in satisfaction of the remaining debt then outstanding.  This conversation occurred in front of the Applicant’s husband, and the response to the Respondent’s proposal by the Applicant was “alright” and further “yes”.

4. On the agreed date, being Saturday 1 April 2017, the Applicant spoke by telephone with the Respondent, indicating that her child was sick and as a consequence, her husband would collect the cheque on her behalf and that the Respondent was to give the cheque to him.

5. At 2.00pm that day the Applicant’s husband arrived at the Respondent’s home to collect the cheque as agreed between the Applicant and Respondent. The Applicant’s husband directed the Respondent to make the cheque out in his name, Kohinoa Fonua.  The Respondent asked Mr Fonua to write his own name down on the cheque stub and the cheque to ensure that it was spelt correctly.  Mr Fonua did so.  The Respondent then filled in the amount of the cheque, being $10,000, and gave it to Mr Fonua. The cheque had cheque number 006014 and was payable from the Respondent’s ANZ Business Overdraft Account with account number 3542/31658.  The cheque stub completed by Mr Fonua on 1 April 2017 bears the number 006014.

6. Later that day Mr Fonua deposited the cheque at a bank in Werribee Plaza in an account in his name.  On or around 3 April 2017 the cheque cleared on the Respondent’s overdraft account.  The funds were deducted leaving the Respondent’s overdraft with a balance of $69,224.66 DR.

7. On 26 April 2017 the Applicant filed the creditor’s petition the subject of these proceedings.  After being served with the creditor’s petition the Respondent retained his solicitor.  On 7 June 2017 the Respondent deposited monies into Mr Castellano’s trust account to be paid to the Applicant in satisfaction of the debt remaining owing.  However, as a result of the Applicant disputing the $10,000 payment made on 1 April 2017, the monies have continued to remain in the Respondent solicitor’s trust account.  At the time of the hearing of this matter the totality of the monies owing to the Applicant had been paid into the Respondent’s trust account awaiting agreement by the Applicant that she had in fact been paid the initial payment of $10,000. 

Mr Fonua’s attendance at Court

1. The Applicant’s evidence was that she separated from her husband at the end of February 2017. She agreed that the Respondent and her husband’s only connection was herself. She denied ever having told the Respondent to give a $10,000 cheque to her husband. The Applicant’s affidavit evidence of 31 July 2017 (paragraph 11) was that she had no knowledge of the Respondent allegedly giving her husband the sum of $10,000 prior to 31 May 2017.  She claimed to be shocked by the allegation. In her affidavit sworn 28 August 2017 the Applicant annexed a copy of a statutory declaration alleged to be completed by her husband, wherein he claimed that no arrangement was made for him to collect a cheque on behalf of the Applicant and nor did he sign his name on the Respondent’s cheque butt.

2. The Applicant failed to put her husband before the Court.  There was no affidavit evidence of Mr Fonua filed by the Applicant and nor did the Applicant subpoena him to attend at Court. 

3. On 6 September 2017, and as a result of the Applicant’s failure to put any evidence from Mr Fonua before the Court, the Respondent issued a subpoena to Mr Fonua requiring him to attend Court to give evidence and produce documents on the hearing of this matter.  Ultimately, the Respondent was unable to serve the subpoena on Mr Fonua.  The affidavit evidence of Ms Pepper sets out the various attempts made by the Respondent’s solicitors to locate Mr Fonua. Those efforts were extensive and costly to the Respondent in circumstances, the Court finds, where the Applicant could readily have made her husband available to give evidence. 

4. Included in those attempts was one, on or about 13 September 2017, wherein the Respondent’s solicitors telephoned the Applicant’s then solicitors requesting provision of a current address for Mr Fonua for service purposes.  That request was followed by a written request from the Respondent’s solicitors.  No response was received from the Applicant and on 25 September 2017, being the day before the Applicant’s solicitors served a notice of withdrawal as lawyer, an email was received by the Respondent’s solicitors from the Applicant personally, wherein the Applicant threatened that if no agreement could be reached between the parties by 1 October 2017 she would contact the Victorian Building Authority with a view to having the Respondent’s building “licence and registrations ... removed” stating that she has “all the relevant documents for Victorian Building Authority for this to happen.”[1]

   [1] Affidavit of Olivia Pepper affirmed 2 October 2017, Exhibit 8.

5. On 29 September 2017 the Respondent’s solicitors emailed the Applicant:-

   a)noting that the Respondent had been unable to serve the subpoena on Mr Fonua;

   b)requesting that she make Mr Fonua available for examination on 3 October 2017; and

   c)attaching three documents;

   i)the subpoena;

   ii)an affidavit of attempted service, and

   iii)a PDF comprising documents the ANZ produced in answer to a subpoena issued to it which documents the Respondent had inspected the day prior, being 28 September 2017, and being documents which established that Mr Fonua deposited into his bank account a cheque for $10,000 from the Respondent. 

6. No response was received by the Applicant and Mr Fonua was not before the Court on the hearing of this matter.  The Court infers that the evidence of Mr Fonua would not have assisted the Applicant.

Solvency of the Respondent

1. The Applicant has been aware since at least 3 July 2017, that the Respondent is solvent. On each of the occasions of 29 August 2017 and 3 October 2017, being the final hearing, the matter of solvency was raised with the Applicant, she being a litigant in person, with the Court bringing to the attention of the Applicant the matters set out in s.52(2) of the Bankruptcy Act 1966 (Cth) (‘the Act’), in particular in relation to the matters before the Court as set out in the respective affidavits of the parties which overwhelmingly appeared to support the Respondent’s contention that he was solvent.

2. Section 52(2) of the Act is relevantly:-

   “If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:

   (a)  that he or she is able to pay his or her debts; or

(b)  that for other sufficient cause a sequestration order ought not to be made;

it may dismiss the petition.”

1. As at 3 July 2017, in “Exhibit D” as annexed to the Respondent’s affidavit sworn 3 July 2017, the Respondent had total net assets of $869,343. In particular, the Respondent was the sole registered proprietor of a property situate at 15 Research Road Lara in the State of Victoria being a six acre property which had been owned by him for approximately 40 years.  The home in which he resides is situate on that property, as is a second home which is tenanted for the sum of $300 each week. 

2. The Applicant put many irrelevant matters before the Court and sought to conduct a fishing expedition in relation to the Respondent’s life and business operations. She required the Respondent to put before the Court on an adjourned date, a sworn valuation (at considerable cost to him) in respect of his six acre property at 15 Research Road Lara. 

3. The Respondent’s particular financial circumstances are:-

   a)the Respondent is a registered builder. His registration certificate expires on 6 June 2019; 

   b)the Respondent has an ANZ Business Extra 50 Account with a balance, as at 2 October 2017, in the sum of $74,682.05 DR and with a further available balance to him of $9317.95.  This is an overdraft account;

   c)in the Respondent’s solicitor’s trust account is a sum, as at 29 August 2017, of $27,312.58 credited to the Respondent (as at trial the sum was approximately $30,000);

   d)the Respondent has an ANZ term deposit which matures on 11 October 2017. The amount invested is $86,790.46.  That sum was lodged by the Respondent on 11 March 2017;

   e)the Respondent’s Bank of Melbourne statement of account portfolio loan indicates that the closing balance, as at 30 September 2017, of his account BSB number 193879, account number 155530137 is $186,104.01 DR. This is the mortgage sum secured by the Lara property;

   f)the Respondent has additional debts owing by way of water and electricity payments due in the sums of approximately $300 and $400 and council rates payable in the sum of approximately $2000.

4. Additional to the above, by affidavit evidence of 1 August 2017, the Respondent also put before the Applicant copies of his council rate certificate which indicated that the capital improved value of his property at 1/15 Research Road Lara was in the sum of $280,000 as at 1 January 2016.  The remainder of the Lara property had a further value.

5. By affidavit evidence of 25 August 2017, the Respondent provided evidence as to his then financial position including assets, liabilities, income and expenses.  He again deposed to his sole ownership of the property located at 15 Research Road Lara more particularly described in Certificate of Title Volume 8873 Folio 389 which was marked “Exhibit 1” and annexed to his affidavit.  Further annexed and marked “Exhibit 2” was a valuation of the property by a Ms Janet Atkins of Hayeswinckle, a real estate agency in Drysdale, who attended the Lara property on 10 August 2017 for the purposes of providing a valuation.  That valuation valued the Lara property between $979,000 and $1,079,000. 

6. Additionally, the Respondent deposed to owning two cars, farm machinery and tools with an estimated value by him of $54,000 plus household contents which were then insured with MLC for $60,000. 

7. In respect of his income, the Respondent set out details of the projects he was currently engaged in as a builder, being three ongoing projects, and set out financial details in relation to those. His evidence at trial was that he is currently owed the sum of $160,000 in progress payments. The affidavit of 25 August 2017 contained considerable and necessary evidence to establish the Respondent’s solvency together with documentary support for the facts as claimed by the Respondent.  The Applicant continued with the proceedings undeterred.  As the affidavit evidence and subsequent oral evidence proved, the Applicant is solvent. 

8. Moreover, the Court finds that the evidence of the Respondent is to be accepted, namely, that he and the Applicant came to an agreement as to the payment by the Respondent of an initial sum of $10,000 to be followed by two subsequent instalment payments totalling the total amount of the debt owing.  The means by which the $10,000 were agreed to be paid was on a date certain, being 1 April 2017, by cheque with handover of the cheque to be made at the home of the Respondent. 

9. Initially, it was the Applicant who would attend the premises and subsequently, this was altered by discussion between the Applicant and Respondent wherein the Applicant’s husband attended upon the property. 

10. The Applicant’s failure to put evidence from her husband about this disputed matter before the Court leaves the Court to further conclude that the Respondent’s evidence is to be preferred to that of the Applicant. The Applicant’s failure to assist the Respondent in the service of the subpoena issued by the Respondent also went to support the evidence of the Respondent as to the agreement had between the Applicant and the Respondent.

11. The Applicant’s evidence in these proceedings went to a number of matters by which she sought to discredit the Respondent. The Applicant also sought to extend the proceedings by, on the hearing date, requesting further information and further valuations be provided by the Respondent.  Her pursuit of him, given the evidence that was before the Court both prior to the hearing and at the time of hearing, was almost harassing.  The Applicant indicated at the hearing, amongst her many allegations and complaints about the Respondent, that she was bringing further VCAT proceedings against the Respondent in respect of further claimed defects. 

12. There was no act of bankruptcy. The Respondent is solvent. The creditor’s petition was dismissed.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Associate: 

Date:  13 October 2017