GBF Developments Pty Ltd v Mesaritis - [2012] FMCA 8

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GBF DEVELOPMENTS PTY LTD v MESARITIS

[2012] FMCA 8

BANKRUPTCY – Application for review of Registrar’s decision – creditor’s petition – application dismissed.

Bankruptcy Act 1966 (Cth), ss.40, 43(1), 44(1), 52

Jones v Dunkel (1959) 101 CLR 298
McIntosh v Shashoua (1931) 46 CLR 494

Applicant:

GBF DEVELOPMENTS PTY LTD

Respondent:

GREG MESARITIS

File Number:

MLG 281 of 2011

Judgment of:

Hartnett FM

Hearing date:

28 October 2011

Delivered at:

Melbourne

Delivered on:

20 January 2012

REPRESENTATION

Counsel for the Applicant:

Mr Hackett

Solicitors for the Applicant:

Colwell Wright Solicitors

The Respondent:

In Person

THE COURT ORDERS THAT:

The application for review filed 14 September 2011 be dismissed.
The orders made by Registrar Burns on 25 August 2011 are affirmed.
The applicant’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 281 of 2011

GBF DEVELOPMENTS PTY LTD

Applicant

And

GREG MESARITIS

Respondent

REASONS FOR JUDGMENT

Before the Court is an application for review filed by the respondent debtor Gregoris Mesaritis on 14 September 2011. Mr Mesaritis seeks a review of the decision made by Registrar Burns on 25 August 2011 to make orders which were as follows:-
“1. A sequestration order be made against the estate of GREG MESARITIS.
2. The applicant’s costs, including reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
The Court notes that the date of the act of bankruptcy is 21 February 2011
The Court notes that a consent to act as trustee has been signed by Paul Andrew Burness and Matthew James Jess”
At the commencement of the proceedings the respondent debtor sought an adjournment of the proceedings to enable him to obtain legal representation. He had prior to the hearing such representation, but declared at the hearing that he was a litigant in person, because he had “dismissed my legal team”. The application for an adjournment was opposed on the grounds that there was no utility in the granting of such an adjournment and that a further costs impost would be suffered by the applicant with no prospect of recovery from the estate of the respondent because it was argued he is hopelessly insolvent. The Court declined the application for an adjournment. The respondent debtor had legal representation throughout the proceedings leading to the making of a sequestration order and then continuing, in the filing of the application for review and the preparation of affidavit material in support of the application. In that material, the respondent now concedes that he falsely swore before Registrar Burns that he had assets which he did not. The material relied upon by the applicant is essentially that before the Court on the earlier hearing, the Trustee’s report of 27 October 2011 and an affidavit of Ms Fernandez in reply to the material filed by the respondent. The respondent was offered the opportunity to add anything further by way of evidence given in the witness box and have the matter stood down for a period of time in which he could read the affidavit in reply (or have it read to him) and prepare himself. He declined such offer. The hearing of the application for review was itself an adjourned hearing date so ample time had already been afforded to the respondent to prepare and serve his affidavit material. Finally, no cogent reasons for the termination of his solicitors services the day before the hearing was put before the Court by the respondent. It was determined prejudicial to the applicant to not proceed to hear the petition application and in circumstances where the affidavit material of both parties suggested insolvency on the part of the respondent.
The hearing is a hearing de novo of the creditor’s petition albeit the orders made by Registrar Burns continue to operate. The applicant creditor relies upon the following documents which, is submitted by it, satisfy the necessary proof of the matters required as set out in s.52 of the Bankruptcy Act 1966 (Cth) (“the Act”):-
a)Creditor’s petition filed 2 March 2011 (amended as to the date of the act of bankruptcy pursuant to leave given by Registrar Burns on 28 April 2011) and verifying affidavit of Frances Carolyn Fernandez sworn 23 February 2011;
b)Affidavit of James Stuart Wright (the solicitor for the applicant) sworn 23 February 2011 and being an affidavit of personal service of the bankruptcy notice;
c)Orders of Registrar Burns made 28 April 2011 as to dispensation with personal service of the creditor’s petition and a mode of substituted service of the petition;
d)Affidavit of Daryl John West sworn 3 May 2011 as to service of the petition, amended creditor’s petition and other documents in accordance with the orders of Registrar Burns made 28 April 2011;
e)Affidavit of Loren Holly affirmed 16 May 2011 as to substituted service of the petition, amended creditor’s petition and other documents in accordance with the orders of Registrar Burns made 28 April 2011;
f)Affidavits of Frances Carolyn Fernandez sworn 14 June 2011, 20 July 2011 and 22 July 2011 all responding to Mr Mesaritis’ allegation of solvency. Ms Fernandez is the sole director of the applicant creditor and a director of other companies which have loaned monies to the respondent in relation to which she alleges the respondent and/or the respondent and his wife have breached various loan agreements with such other companies causing the applicant to believe the respondent is insolvent;
g)Affidavit of James Stuart Wright sworn 4 August 2011 deposing as to a rejection of the tender made by the respondent and as referred to in the affidavit of John James Kotsifas sworn 22 July 2011 and filed on behalf of the respondent, Mr Kotsifas then acting as the solicitor representing the respondent. Mr Kotsifas filed a notice of intention to withdraw as lawyer on 27 October 2011;
h)Affidavit of Frances Carolyn Fernandez sworn 25 August 2011 being an affidavit of debt;
i)Affidavit of James Stuart Wright sworn 4 October 2011 as to proceedings in the Victorian Civil and Administrative Tribunal, matter number C10 124/2009 between the respondent, his wife and sons as applicants and Frances Fernandez, Breeze Finance Corporation Pty Ltd, Jacaranda Co-operative Housing Society Limited and others as respondents;
j)Affidavit of Karen MacInnes sworn 24 October 2011 as to a further alleged debt owing by the respondent to Gippsland Owners Body Corporate in the sum of $3,096;
k)Affidavit of Timothy Barlow Certified Practicing Valuer sworn 5 August 2011;
l)Trustees statutory report of 27 October 2011, prepared by Trustees, Mr Paul Burness and Mr Matthew Jess who were appointed on 25 August 2011. That report was tendered as an exhibit in the proceedings and is exhibit ‘A1’;
m)Affidavit of Justin Tilley sworn 27 October 2011 as to further alleged debt owing by the respondent to Mr Tilley in the sums of $4,015 and $594;
n)Affidavit of Frances Carolyn Fernandez sworn 28 October 2011 as to debt and the insolvency of the respondent;
o)Affidavit of Robert John Wright sworn 28 October 2011 as to his search of the National Personal Insolvency Index on that day.
The respondent relies upon a notice stating the grounds of opposition and a number of affidavits filed by him in the proceedings. These were sworn by him on 12 June 2011, 15 July 2011, 22 July 2011, 25 July 2011, 24 August 2011, 13 September 2011 and 25 October 2011. In addition, he relied on the earlier referred to affidavit of Mr Kotsifas. The contents of that affidavit as to the tender were in part false.

Consideration

On 31 January 2011, Mr Mesaritis was served with a bankruptcy notice claiming the sum of $20,713.42 owing under assessed costs orders made by the Supreme Court of Queensland in matter number 14170 of 2009 (affidavit of Robert John Wright sworn 23 February 2011, paragraph 2).
The respondent did not, within 21 days after service of the bankruptcy notice, pay the debt claimed, make arrangement to the applicant’s satisfaction for payment of the debt (amended creditor’s petition paragraph 4 and verifying affidavit of Frances Carolyn Fernandez paragraph 3) or apply to set the bankruptcy notice aside (affidavit of Robert John Wright sworn 23 February 2011).
Section 40 of the Act provides:
“Acts of bankruptcy
(1) A debtor commits an act of bankruptcy in each of the following cases:
…
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia – within the time specified in the notice; ...
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; …”
The respondent’s conduct, as referred to in paragraph 6 of these reasons, was an act of bankruptcy as described in s.40(1)(g) of the Act. The act of bankruptcy was committed on 21 February 2011.
On 21 February 2011, the respondent was personally present in Australia, ordinarily resident in Australia and had a dwelling house or place of business in Australia (creditor’s petition paragraph 3 and verifying affidavit of Frances Carolyn Fernandez paragraph 2). There is no dispute between the parties that the requirements of s.44(1) of the Act were met by the applicant. Personal service of the petition was dispensed with by Registrar Burns on 28 April 2011, and substituted service was effected in accordance with his order and proved in the affidavits of Loren Holly affirmed 16 May 2011 and Daryl John West sworn 3 May 2011. The Registrar had before him on the hearing of the petition proof of search and that the debts on which the applicant relied were still owing (affidavit of Frances Carolyn Fernandez sworn 25 August 2011 paragraph 2). The Court had then jurisdiction to make the sequestration order (presently under review) pursuant to s.43(1) of the Act which is as follows:
“Jurisdiction to make sequestration orders
(1)    Subject to this Act, where:
(a)   a debtor has committed an act of bankruptcy; and
(b)   at the time when the act of bankruptcy was committed, the debtor;
(i)     was personally present or ordinarily resident in Australia;
(ii)   had a dwelling-house or place of business in Australia;
(iii)     was carrying on business in Australia, either personally or by means of an agent or manager; or
(iv)   was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.”
Before the Registrar, and as submitted by the applicant creditor and which I accept, the tender of the applicant’s judgment debt and some other amounts for interest and costs admitted to be owing by the respondent, and the refusal of that tender by the applicant, was raised. It was initially suggested that the tender had been accepted by the applicant and that therefore no judgment debt remained owing (affidavit of John James Kotsifas sworn 22 July 2011). The tender had in fact been rejected by the applicant (affidavit of Robert John Wright sworn 4 August 2011). I accept the submission of the applicant that it was open for the applicant to reject the tender and to proceed with its petition:
“The fact that after the presentation of the petition the debtor tendered payment of the assigned debt and the tender was refused cannot in this case affect the result. A petitioning creditor is entitled to refuse payment and proceed with the petition (In Re Gentry [1910] 1 KB 825). The refusal of the tender in this case is consistent with the conclusion, if it does not strengthen it, that the petitioner truly desired to obtain a sequestration order.” (McIntosh v Shashoua (1931) 46 CLR 494 at 505 per Gavan Duffy CJ and Dixon J).”
All the formal requirements under s.52 of the Act are met by the applicant’s affidavit material. The respondent filed a notice stating grounds of opposition to the amended creditors petition, that notice being dated 12 June 2011. In fact, it set out no grounds of opposition but instead relied upon a concurrently sworn affidavit which addressed the issue of the respondent’s solvency alone. That is the question remaining for the Court.
The respondent argues that he is solvent. No other basis for refusing the sequestration order was, or has now, been put. That basis calls for consideration of the discretion conferred by s.52(2) of the Act:
“(2) 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;
…
it may dismiss the petition.”
On 24 August 2011, the respondent swore that his assets included:
a)a 1999 Holden Rodeo worth $4,300.00, a 2000 Ford KA worth $3,500.00 and a half equitable interest in a 1998 Saab 900 worth $4,100.00 (affidavit of Mr Mesaritis sworn 24 August 2011 paragraphs 4.8-4.10);
b)$27,302.15 held in his solicitor’s trust account (affidavit of Mr Mesaritis sworn 24 August 2011 paragraph 4.13);
c)$94,400.00 owing to him from Bruce George McKechnie (affidavit of Mr Mesaritis sworn 24 August 2011 paragraph 4.15).
The Court is satisfied on the evidence that:
a)the respondent does not own any motor vehicles (Trustee’s report page 10);
b)the entirety of the funds previously held in the respondent’s solicitors trust account have been spent on legal costs (affidavit of Mr Mesaritis sworn 25 October 2011 paragraph 5a);
c)the money the respondent claimed was owing to him by Mr McKechnie is in fact owing to Gregandy Constructions Pty Ltd (affidavit of Mr Mesaritis sworn 25 October 2011 paragraph 5c);
d)the respondent did not disclose that:
i)he owed $3,096.00 to Phillip Island Storage Units;
ii)he owed $4,605.00 to Justin Tilley;
iii)he owed $23,925.00 to the Commonwealth Bank of Australia (Trustee’s report page 12; the respondent originally admitted this debt at paragraph 3a of his affidavit of 22 July 2011, but then “recalled” that he did not owe it (paragraph 6.1 of his affidavit sworn 24 August 2011).
Apart from his inability to satisfy the relatively minor debts identified above, the respondent owes loan debts of $1,676,855.98 to the applicant, Poinciana Cooperative Housing Society Limited and Jacaranda Cooperative Housing Society Limited (affidavit of Frances Carolyn Fernandez sworn 27 October 2011 annexures pages 130-171), in respect of which he has made no payments at all for at least 18 months despite being contractually obliged to make monthly payments.
The Trustee’s report of 27 October 2011 detailed that the respondent had not lodged a Statement of Affairs to that time. Thus, the information contained in the report was obtained from the Trustee’s own independent investigations. The report noted that the respondent carried on a business as a builder in his own right or through various corporate entities. It concluded that he had no cash resources at all. The list of creditors as set out in the Trustee’s report totals $1,168,319.72.
The other evidence before the Court is that the respondent debtor has a one-third interest in real property situate at 14 Beenak Street Reservoir Victoria. His siblings hold the remaining two-third interest. This property is encumbered by way of mortgage with Venam Investments Pty Ltd although in what sum is unknown as the respondent puts no independent evidence before the Court as to that liability, albeit he claims his liability to be $13,333.00 and being one-third of a $40,000.00 loan. No loan documents are provided to support that claim and the respondent may be liable for the total sum. The value of the respondent’s interest is approximately $163,333.33 as at June 2011. No evidence is put by the respondent as to how he might realise his interest in this asset in the short term or at all.
The respondent is solvent if, and only if, he is able to pay his debts as and when they become due and payable. On the evidence before the Court the respondent is not solvent. He has no ability to pay his debts from his cash resources or from the sale, mortgage or pledge of his assets within a relatively short time. The summary of the respondent’s assets and liabilities as put by the applicant and which on the evidence I accept, is a deficit of approximately $1,607,254.07. The respondent immediately owes the applicant the $20,713.42 which formed the basis of the applicant’s bankruptcy notice. He admits that he has not, without excuse, paid $598.00 to AGL Sales Pty Ltd (affidavit of Greg Mesaritis sworn 24 August 2011 paragraph 6.5) and has not paid a debt to ACM for $794.00 (affidavit of Greg Mesaritis sworn 24 August 2011 paragraph 6.9). He admits that he received $364,115.87 from Jacaranda Cooperative Housing Society Limited (affidavit of Greg Mesaritis sworn 25 October 2011 paragraph 28), which was advanced pursuant to loan agreements requiring monthly payments of principal and interest (affidavit of Frances Carolyn Fernandez sworn 14 June 2011 annexures H-J). In fact, the respondent and his wife are jointly and severally liable for the totality of the loan agreements between them and Jacaranda Cooperative Housing Society Limited which were advanced to finance a development at 7 Garden Court Cape Wollomai. The loan balance as at 9 June 2011 totals $983,309.89 as acknowledged by the respondent (and now approximately $1,034,230.81). The evidence shows the respondent to have received the totality of the $650,000.00 advanced but to have made no payments with regards to these loan liabilities. Likewise the respondent has made no payments with regards to his borrowings from Poinciana Cooperative Housing Society Limited which totalled $420,000.00.
I accept Counsel for the applicant’s submissions that the respondent does not specify the basis for his unspecified “equitable interest” in his wife’s properties (affidavit of Greg Mesaritis sworn 25.10.11 paragraph 13) and that his wife has not acknowledged his interest in circumstances where she would be expected to have relevant evidence to give and to be available to give evidence for the respondent. I infer that her evidence would not assist the respondent (Jones v Dunkel (1959) 101 CLR 298).
In all the circumstances the respondent’s application for review should be dismissed.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Hartnett FM

Date: 20 January 2012