Guzelian v Spargo - [2012] FMCA 782

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GUZELIAN v SPARGO

[2012] FMCA 782

BANKRUPTCY – Creditor’s petition – judgment arising from a CTTT determination in a building dispute – insufficient grounds for going behind the judgment debt – no discretionary reasons for dismissing the petition – sequestration order made.

Bankruptcy Act 1966 (Cth), ss.52(1), 52(2)(b)

Home Building Act 1989 (NSW), s.10

Totev v Sfar (2006) 230 ALR 236, [2006] FCA 470
Wren v Mahony (1972) 126 CLR 212, [1972] HCA 5

Applicant:

JAKE GUZELIAN

Respondent:

BRETT SPARGO

File Number:

SYG 597 of 2012

Judgment of:

Smith FM

Hearing date:

28 August 2012

Delivered at:

Sydney

Delivered on:

28 August 2012

REPRESENTATION

Counsel for the Applicant:

Mr S Devine

Solicitors for the Applicant:

MSB Lawyers

Counsel for the Respondent:

Respondent in person

ORDERS

A sequestration order be made against the estate of Brett Spargo.
The applicant creditor’s costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note that the date of the act of bankruptcy is 20 February 2012.
Note that a consent to act as trustee has been signed by Jason Shane Cronan and Terry Grant van der Velde.
The applicant must give a copy of this order to the Official Receiver within 2 working days.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 597 of 2012

JAKE GUZELIAN

Applicant

And

BRETT SPARGO

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

Mr Guzelian moves on a petition for the sequestration of Mr Spargo’s estate in bankruptcy. The petition was lodged on 19 March 2012, and relies upon an indebtedness of $22,662.76 under a default judgment entered in the Mudgee Local Court on 9 April 2010 together with statutory interest on that judgment. That amount remains owing, and the fact that the judgment debt is unpaid is not disputed by Mr Spargo.
Also not in dispute is the commission of an act of bankruptcy based upon non‑compliance with a bankruptcy notice which demanded payment of that amount. The bankruptcy notice was issued on 23 December 2011, and was served personally on Sunday, 29 January 2012. Mr Spargo has not contested that an act of bankruptcy occurred on Monday, 20 February 2012 as a result of his non‑compliance with the requirements of the bankruptcy notice.
I am satisfied on the evidence before me that Mr Guzelian has established the formal requirements for the making of a sequestration order, pursuant to the provisions of s.52(1) of the Bankruptcy Act 1966 (Cth) and the other provisions of that Act and the regulations.
Mr Spargo has opposed the making of a sequestration order by filing a notice of grounds of opposition and a supporting affidavit. The notice of grounds of opposition is obscurely worded, but looking at his documents it is clear that Mr Spargo disputes his underlying liability for the money ordered to be paid in the judgment debt, and contends that, in fact, Mr Guzelian owes him money.
The documents before me show that the parties were in dispute concerning their performance of an informal contract, in which Mr Spargo undertook to perform building work on Mr Guzelian’s home. The work appears to have become quite extensive, as a result of a series of discussions between the parties, giving rise ultimately to a one page written quote given by Mr Spargo for described work for $56,639. It appears that some payments were made on an informal basis in the course of the building work, and that ultimately Mr Guzelian refused to pay additional amounts which were demanded by Mr Spargo when the cost of the building work was exceeding the amount of his quote.
The dispute was then taken to the Consumer, Trading and Tenancy Tribunal (“CTTT”), in an application by Mr Guzelian for damages for the cost of completing the work after Mr Spargo refused to continue without receiving more money. Mr Spargo cross‑applied, seeking an order for the payment of additional amounts which he claimed, including amounts for which he had become liable to suppliers.
Resolution of the dispute involved the taking of sworn evidence from both sides, at a contested hearing. The Tribunal member then, on 28 January 2010, issued “Brief Reasons” for accepting Mr Guzelian’s evidence in preference to that of Mr Spargo as to the existence of a fixed price contract. The Tribunal therefore rewarded compensation for the cost of completing the works abandoned by Mr Spargo.
In relation to Mr Spargo’s cross‑claim, the Tribunal member did not address the merits of his claims, but gave shortly the reasons for dismissing the cross-claim: “the applicant is unlicensed, did not provide Home Owners Warranty insurance and did not have a contract in writing and so is not entitled to any remedy with respect to the works”.
I would understand these reasons to apply s.10 of the Home Building Act 1989 (NSW), which provides:
10Enforceability of contracts and other rights
(1)A person who contracts to do any residential building work, or any specialist work, and who so contracts:
(a)     in contravention of section 4 (Unlicensed contracting), or
(b)     under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or
(c)     in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph,
is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person.
(2), (3)(Repealed)
(4)This section does not affect the liability of the person for an offence against a provision of or made under this or any other Act.
In effect, Mr Spargo now asks the Bankruptcy Court to revisit the building dispute, and to prefer his version of the oral exchanges between himself and Mr Guzelian and his wife, in preference to the version which was accepted by the CTTT.
On the evidence before me today, this would be extremely difficult to do, even on a provisional basis, since both parties have sworn affidavits giving totally conflicting accounts of events, on which neither is sought to be cross‑examined. Moreover, reading all the documents as well as I can, I am unable to detect any obvious point favouring Mr Spargo by disproving Mr Guzelian’s account. This includes the fact, which Mr Spargo adverts to, that at one stage Mr Guzelian appears to have agreed to pay more than the quoted amount. However, Mr Guzelian contends that he did so under compulsion, and the Tribunal appears to have agreed with Mr Guzelian in that respect, as well as finding the absence of consideration for any promises to pay additional amounts. More significantly, Mr Spargo has not presented any legal argument explaining how he could overcome the effects of s.10 of the Home Building Act.
Taking into account all of the evidence before me, and what has been said today by Mr Spargo, I am not persuaded that he has established any reason for going behind the judgment debt which arose from the registration of the CTTT determination. In my opinion, that judgment should be regarded as being based upon a determination of the underlying dispute after a contested hearing on the merits, and I am not satisfied that any good reason has been raised for exercising a discretion to go behind the judgment (cf Wren v Mahony (1972) 126 CLR 212, [1972] HCA 5 at 224).
Moreover, I am also not satisfied that Mr Spargo has established an “other sufficient cause” within s.52(2)(b) of the Bankruptcy Act for declining to make a sequestration order, based on his contention that Mr Guzelian owes him money, rather than the converse. Applying the principles which were discussed by Allsop J in Totev v Sfar (2006) 230 ALR 236, [2006] FCA 470 at [37]‑[44], I am not satisfied that he has pointed to evidence showing that there is a probability that he has a claim against Mr Guzelian which is likely to succeed in an amount exceeding Mr Spargo’s liability under the judgment.
Mr Spargo has not attempted to show the Court that he is able to pay his debts when they fall due or within a reasonable time, and I am not satisfied that there is any discretionary reason for the Court to decline to make a sequestration order today.
On the evidence before me, Mr Guzelian has established a prima facie right as a creditor to the making of a sequestration order, and I propose to make one today.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Smith FM

Date: 4 September 2012