Leondaris v KGB Design & Construction Pty Ltd - [1998] FCA 1354

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY – application for discharge of ex parte orders - appointment of trustee - control of debtor’s property – whether sufficient evidence to justify making of orders - whether orders in the interests of creditors – trader’s bill of sale – preservation of property.

Bankruptcy Act 1996 (Cth) ss 50(1), (2), (3) and (4)
Bankruptcy Regulations rr 4.06, 4.07

Re Mader; ex parte Henderson (unreported, Pincus J, 17 July 1986), followed

Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118, followed

Re Penning, Ex parte State Bank of S.A. (1989) 89 ALR 417, cited
Penning & Steel Tubes Supplies Pty Limited (1988) 80 ALR 689, cited

STEVEN LEONDARIS v
KGB DESIGN & CONSTRUCTION PTY LTD

NG 8120 OF 1998

TAMBERLIN J
SYDNEY

27 OCTOBER 1998

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 8120 of 1998

BETWEEN:

STEVEN LEONDARIS
DEBTOR

AND:

KGB DESIGN & CONSTRUCTION PTY LTD
ACN 009 589 397
CREDITOR

JUDGE:

TAMBERLIN J

DATE OF ORDER:

27 OCTOBER 1998

WHERE MADE:

SYDNEY

Upon the continuance of the undertaking as to damages given by the creditor in respect of Jim and Elizabeth Anastasiou, the orders of the Court made on 12 October 1998, with the variations set out below, are to remain in force until 9 November 1998 or such further date as may be fixed for hearing of the creditors’ petition.

The Court also orders that:

Order 6 be varied to read as follows:

“6.The debtor, Steven Leondaris, be restrained, without prior approval of the Court from paying, lending, or depositing any money with, transferring or delivering any property to, any other person, company or entity except in the ordinary course of business.”

Further orders be made as follows:

“11.The trustee, Andrew Hugh Jenner Wily, is authorised to make payment out of the account of such business and reasonable living expenses of the debtor as the trustee shall approve.
12.The trustee’s remuneration be at the rate set by the Insolvency Practitioners’ Association of Australia.
13.Costs of the s 50 application and the action to set aside the orders made on 12 October 1998 be reserved.

14. Reserve liberty to apply on forty-eight hours notice.”
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 8120 of 1998

BETWEEN:

STEVEN LEONDARIS
DEBTOR

AND:

KGB DESIGN & CONSTRUCTION PTY LTD
ACN 009 589 397
CREDITOR

JUDGE:

TAMBERLIN J

DATE:

27 OCTOBER 1998

PLACE:

SYDNEY

REASONS FOR JUDGMENT

Before me is an application by the debtor to discharge orders made ex parte on 12 October 1998 under s 50 of the Bankruptcy Act 1966 (Cth), (“the Act”) appointing Mr Wily, a registered trustee, to take control of the debtor’s property until further order. Liberty to apply on twenty-four hours notice was reserved to both parties. The orders were made after an undertaking as to damages was given by the debtor…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1998] FCA 1354
Decision Date: 27 OCTOBER 1998

CaseChat Overview and Summary

The Federal Court of Australia was presented with an application by Steven Leondaris, a debtor, to discharge ex parte orders made under Section 50 of the Bankruptcy Act 1966 (Cth). The orders, issued on 12 October 1998, appointed a trustee to control Leondaris's property, pending a creditors’ petition. KGB Design & Construction Pty Ltd, a creditor, sought the preservation of the debtor's property, fearing the dissipation of assets. The primary legal issue was whether sufficient evidence existed to justify the making and continuance of the ex parte orders, and if such orders were in the creditors' interests. The court examined the debtor's compliance with a bankruptcy notice, the existence of a creditor’s petition, and the potential value and preservation of the debtor's assets, particularly a sandwich shop business.

The court reviewed the evidence, including a bankruptcy notice served on the debtor, a consent judgment against the debtor and his wife, and an earlier history of non-compliance with a bankruptcy notice. The court also considered a bill of sale concerning the debtor's business, which was lodged with the Land Titles Office. The creditor argued that the business was largely a cash income business and its value could diminish if assets were removed. The debtor, on the other hand, contended that there was insufficient evidence to justify the orders and that the orders should be discharged. The court held that there was sufficient evidence to justify the issuance of the ex parte orders initially. However, the court modified Order 6 to restrict the debtor from transferring or disposing of any property without prior court approval. The court also introduced additional orders to authorize the trustee to pay for the debtor’s reasonable living expenses, set the trustee’s remuneration rate, reserve costs, and maintain liberty to apply on forty-eight hours notice.

In summary, the court determined that the ex parte orders should remain in force until further notice, with modifications to ensure the preservation of the debtor's assets for the benefit of creditors. The orders were thus varied to safeguard the creditors' interests while allowing for necessary business operations. The court reserved costs and maintained the liberty to apply on short notice, reflecting the dynamic nature of the case and the need for ongoing judicial oversight.

Orders