Girardo v Westpac Banking Corporation
[2009] FMCA 597
•8 May 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GIRARDO v WESTPAC BANKING CORPORATION | [2009] FMCA 597 |
| BANKPUTCY – Application to review Registrar’s decision – sequestration order – demonstration of solvency. |
| Bankruptcy Act 1966, ss.40, 52 Uniform Civil Procedure Rules, r.292 |
| International Alpaca Management Limited v Ensor [1999] FCA 72 Sandell v Porter (1966) 115 CLR 666 |
| Applicant: | MARIO GIRARDO |
| Respondent: | WESTPAC BANKING CORPORATION |
| File Number: | BRG 867 of 2008 |
| Judgment of: | Wilson FM |
| Hearing date: | 8 May 2009 |
| Date of Last Submission: | 8 May 2009 |
| Delivered at: | Brisbane |
| Delivered on: | 8 May 2009 |
REPRESENTATION
| Counsel for the Applicant: | N/A |
| Solicitors for the Applicant: | In person |
| Counsel for the Respondent: | Mr O'Regan |
| Solicitors for the Respondent: | Allens Arthur Robinson |
| Counsel for Supporting Creditor | Mr Mistry |
| Solicitors for Supporting Creditor | Grace Lawyers |
| Counsel for Trustee in Bankruptcy | N/A |
| Solicitors for Trustee in Bankruptcy | MacGillivrays |
ORDERS
The application for review is dismissed.
The applicant shall pay the respondent's costs of and incidental to the application to be taxed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 867 of 2008
| MARIO GIRARDO |
Applicant
And
| WESTPAC BANKING CORPORATION |
Respondent
REASONS FOR JUDGMENT
On 11 February 2009 a sequestration order was made against the estate of the applicant by Deputy Registrar Baldwin.
On 17 February 2009 an application for review of that decision was filed in this Court. The application for review sets out three grounds on which it is alleged that the sequestration order should be set aside:
1.that the applicant was taking steps to set aside the default judgment that was the basis of the bankruptcy notice;
2.that the applicant wishes to be at liberty to lodge a counterclaim in excess of the amount claimed by the respondent;
3.there was a denial of natural justice in the matter in that the applicant had requested an adjournment of the hearing because he was required to be in attendance in another Court when the matter was to be dealt with by the Deputy Registrar.;
On the hearing before me the applicant, who appeared with the assistance of a solicitor who acts for his brother, raised two further grounds on which it is said that a sequestration order should not have been made. They are:
a)First, that the bankruptcy notice was not served on the applicant; and
b)Secondly, the applicant claims that he is solvent in the sense that s.52(2)(a) of the Act could not have been satisfied before the Deputy Registrar and is not satisfied before me.
The third matter raised in the application for review identified at paragraph 2, in my view, takes the matter nowhere. The application for review is a hearing de novo. Any denial of natural justice to the applicant, if in fact that occurred, is beside the point. The question is whether, on the evidence available before me today, a sequestration order was properly made.
The first matter raised is also without substance. As is made plain by the affidavit evidence, the judgment on which the bankruptcy notice is based was not a default judgment; it was a judgment of the Supreme Court of Queensland made pursuant to r.292 Uniform Civil Procedure Rules on an application for summary judgment. At the time the judgment was entered a Notice of Intention to Defend had been filed on the applicant's behalf. Further, as is deposed to, no Notice of Appeal has been filed against the judgment of 26 September 2008. Any appeal is now well out of time, and leave to appeal would be required. In my view, the first ground relied upon has no merit.
The second ground has its foundation in an assertion that the applicant was induced by allegedly misleading conduct on the part of the respondent bank to acquire an interest in a business or a property situate at Yatala. The difficulty with this argument is that s.40(1)(g) Bankruptcy Act 1966 requires for there not to be an act of bankruptcy, that the applicant satisfy the Court that he has a counterclaim set off, or cross-demand, that he could not have set up in the proceeding in which the judgment or order was obtained. It was accepted by Mr Day that all of the relevant events concerning the action for the inducement, or misleading conduct, occurred prior to 28 September 2008.
Whether or not the failure to incorporate the counterclaim in the Notice of Defence that was filed in the Supreme Court proceedings is attributable to the fault of the applicant's then legal advisors, is beside the point. There is no counterclaim demonstrated that falls within the ambit of s.40(1)(g) of the Act. I will shortly turn to the question of solvency and whether that asserted counterclaim is of any value such as to persuade the Court that the applicant is able to satisfy his debts.
That disposes of the grounds raised in the application for review.
The applicant contends that he was not properly served with either the bankruptcy notice or the creditor's petition and accompanying documents. In that regard the applicant gave oral evidence that he was not present on 22 November 2008 when Mr Ryan Williams, a process server engaged by the respondent, says that he served the applicant with the bankruptcy notice. The matter was not explored in any great detail in the cross-examination of the applicant.
The applicant accepts that he was present at the Nerang Police Station on 12 January 2009 when a person placed documents on the counter of the police station. Mr Williams, in an affidavit filed 28 January 2009, says that on that date he served the applicant with, inter alia, the creditor's petition by delivering the documents to him at the Nerang Police Station. On that occasion Mr Williams would have had an opportunity to observe the applicant. Mr Williams gave evidence that he recognises the respondent and identified him as the person he served not only with the bankruptcy notice, but also as the person he served with documents on 21 June 2008 also at the Royal Pines Golf Course, being the Claim and Statement of Claim in the Supreme Court proceedings. Mr Williams said that he also served the applicant with another bankruptcy notice issued by a creditor other than the respondent bank. None of these matters were challenged in Mr Williams' cross-examination. I accept the evidence of Mr Williams that he served the bankruptcy notice on the applicant on 22 November 2008.
In support of the contention that he was not served with court documents, in his affidavit filed 3 April 2009, the applicant has attached a document said to be signed by his brother, Robert Girardo. Mr Robert Girardo did not file an affidavit in the proceedings and was not offered for cross-examination. Further, a document is attached to that same affidavit purporting to be an affidavit of John Hasan who states that he recently found Court documents addressed to the applicant in his letterbox. It is not known which bankruptcy notice he refers to. No further detail is provided in this document. Again no separate affidavit was provided by Mr Hasan, and he was not available for cross-examination. I would place no weight on the evidence, if it is properly called that, of Mr Robert Girardo or Mr John Hasan. I am, as I have said, satisfied that the bankruptcy notice was properly served.
The remaining matter then is that of solvency which, as I have earlier said, arises under s.52(2) of the Act. The Court is required to be satisfied by the applicant that he or she is able to pay his or her debts, or that, for other sufficient cause, a sequestration order ought not be made. It is plain from the language of the statute that the onus lies on the applicant to prove that he or she is able to pay his debts. That term is one that has attracted considerable judicial comment. A regularly quoted authority on this topic is International Alpaca Management Limited v Ensor [1999] FCA 72.
The applicable test, which dates back to Sandell v Porter (1966) 115CLR 666 at 670-72 is that a debtor needs to prove that he or she is able to meet his or her liabilities as they fall due, even if that might in some circumstances require the realisation of assets. If the ability to satisfy debts does require the realisation of assets, it needs to be demonstrated that they can be realised within a relatively short time to enable the debts to be discharged.
In this case the evidence as to solvency is quite unsatisfactory. The judgment debt is for a sum exceeding $7.5 million. In his affidavit filed 6 May 2009, the applicant deposes to being currently in receipt of Centrelink benefits as he has not been able to work full time:
due to his being involved in other proceedings in other Court jurisdictions.
The applicant deposes that he has furniture and clothing of minimal value and liabilities including credit card advances totalling $15,000. It seems that the only asset that the applicant can point to as being sufficient to discharge his indebtedness to the respondent is what is described in paragraph 23 of his affidavit as a chose in action against the bank and other parties involved in the transaction relating to the purchase of the Yatala property.
In that regard the applicant's affidavit seems to depose to these matters. The Yatala property was acquired by Funk Road Developments Pty Limited. The applicant is a director of that company. It is in receivership. The applicant says, at para. 11 of his affidavit:
through my ownership of Knight Property Investments No 3 Pty Limited I have significant equity and a chose in action against the applicant and other parties. The present application against me for sequestration should fail by virtue of the residual equity I have in Funk Road Developments Pty Ltd for which the applicant is the sole secured creditor by virtue of its mortgage. That equity is sufficient to meet the present demand and outstanding mortgage on the property described as 360 Burnside Road, Gilberton.
The last mentioned property is that which has been described as the "Yatala property".
That is really the extent of the evidence on the topic. The applicant does say that when he was, to use his language, induced to invest in Funk Road Developments Pty Limited, the property was worth $17.5 million, and since that time additional development approvals have been obtained enhancing its value. There is no present valuation of the property. There is no evidence as to any other liabilities of that company which, as I have said, is in receivership. There is no evidence as to whether any other persons have any entitlement to any profits or excess which may be available to that company once its receivership is determined. The evidence, as I have said, is quite lacking on this topic.
Further, even if one was prepared to infer, which I am not, that there was a surplus sitting in Funk Road Developments Pty Limited, which could be used to extinguish the debt presently owed to the respondent, there is no evidence as to how long it would take to extract those moneys from the company such as would be sufficient to satisfy the Court that the applicant is able to pay his debts within a reasonable period of time.
For those reasons I am not satisfied that the applicant has discharged the onus on him of demonstrating solvency. Each of the grounds relied upon to review the order of the Deputy Registrar are without merit. The application for review should be dismissed.
I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 25 June 2009
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