Liprini v Liprini - [2010] FMCA 687

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LIPRINI v LIPRINI

[2010] FMCA 687

BANKRUPTCY – Creditor’s remedies under Part IV – orders made in family provision proceedings against executor – effect of settlement at mediation – whether personal liability in debt imposed on executor – whether proceedings under Part IX required – validity of bankruptcy notice and petition – debtor’s allegations of fraud affecting consent orders – insufficient evidence to go behind Supreme Court judgments – discretionary considerations for making sequestration order – application to set aside bankruptcy notice dismissed – sequestration order made.

Bankruptcy Act 1966 (Cth), ss.40(1), 41(6A), 41(7), 43(1), 52(1), 52(2), 52(3), 244
Bankruptcy Regulations 1996 (Cth), r.16.01
Family Provision Act 1982 (NSW)
Uniform Civil Procedure Rules 2005 (NSW), Pt 54

Adamopoulos & Anor v Olympic Airways SA & Anor (1990) 95 ALR 525
Austrust Trade & Anor v Estate of the Late Evan Schomburgk Herbert & Anor [1998] FCA 1621
Harvey v Phillips (1956) 95 CLR 235
Hubner v Australia & New Zealand Banking Group Ltd (1999) 88 FCR 445
Levy v Kum Chah (1936) 56 CLR 159
Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428
Liprini v Kerem & Anor(No. 2) [2010] FMCA 244
Liprini v Liprini [2010] NSWCA 126
Macquarie Leasing v Dekkan [2009] FMCA 349
Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306
Repatriation Commission v Nation (1995) 57 FCR 25
Rixon v Bryett [2001] FCA 433
Skalkos v Tzovaras Legal Pty Ltd [2008] FMCA 543
Totev v Sfar [2006] FCA 470, (2006) 230 ALR 23
Wolff v Donovan (1991) 29 FCR 480
Wren v Mahony (1972) 126 CLR 212

Applicant:

KEVIN LIPRINI

Respondent:

ALLEN STEPHEN LIPRINI

File Number:

SYG 2675 of 2009

SYG 66 of 2010

Judgment of:

Smith FM

Hearing date:

3 September 2010

Delivered at:

Sydney

Delivered on:

3 September 2010

REPRESENTATION

Counsel for the Applicant:

Mr M Roset

Solicitors for the Applicant:

Redmond Hale Simpson

Counsel for the Respondent:

In Person

Solicitors for the supporting creditors, Fikri Kerem and Andrew Daniel:

Law Partners Solicitors and Barristers.

ORDERS (in matter SYG 2675 of 2009)

The application is dismissed.
The respondent’s costs, including all reserved costs, be taxed and paid from the estate in the bankruptcy of the applicant arising under the sequestration order made on 3 September 2010 in the priority fixed by s.109(1)(a) of the Bankruptcy Act 1966 (Cth).
The respondent must give a copy of this order to the Official Receiver in Sydney within 5 days.

ORDERS (in matter SYG 66 of 2010)

The applicant has leave to amend paragraph 4 of the petition so as to rely upon an act of bankruptcy occurring on 2 November 2009, being 21 days after 10 October 2009 and the date when the respondent admits service of the bankruptcy notice. Dispense with re-verification and service.
A sequestration order be made against the estate of Allan Stephen Liprini.
All proceedings under the sequestration order are stayed under s.52(3) of the Bankruptcy Act 1966 (Cth) for 21 days.
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 2 November 2009.
Note that a consent to act as trustee has been signed by Scott D Pascoe and has been lodged with the Official Receiver in Sydney.
The applicant must within 2 days give a copy of this order to the Official Receiver in Sydney.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 66 of 2010

SYG 2675 of 2009

KEVIN LIPRINI

Applicant

And

ALLEN STEPHEN LIPRINI

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

This judgment gives my reasons for refusing to set aside a bankruptcy notice served on Dr Allan Liprini, who I shall refer to as Dr Liprini, in response to his application filed on 3 November 2009. I also give reasons for refusing to adjourn a petition relying upon that bankruptcy notice, filed by his brother, Kevin Liprini, on 15 January 2010, and I explain my reasons for making a sequestration order today. Dr Liprini was not in attendance when I delivered this judgment, but I foreshadowed to him before the luncheon adjournment my intention to make a sequestration order today, and I attempted to explain my reasons to him shortly.
The indebtedness of Dr Liprini to Kevin Liprini relates back to family provision proceedings in the Supreme Court of New South Wales concerning both the estates of their deceased parents. As I shall narrate, the litigation has extended over several years. It is now apparent that Dr Liprini has committed himself to opposing his brother receiving any provision from his parents’ estates, including by opposing efforts at enforcement of consent orders of the Supreme Court agreed at a mediation. In the course of the litigation he has employed, and become disillusioned with, the efforts of a series of barristers and solicitors, and has become embroiled in further litigation over the payment of their fees. I addressed one such claim in Liprini v Kerem & Anor(No. 2) [2010] FMCA 244, without needing to make findings of fact in relation to the performance by those solicitors of their professional responsibilities. No submission was made in the present proceedings, which have been in my docket since December last year, that I should recuse myself by reason of my involvement in the other matter, and after reviewing my reasons in that case I do not consider that I need to do so.
The petition filed on 15 Jan 2010 relies upon a debt of $851,335.96, which is claimed to be due to Kevin Liprini by Dr Liprini from his personal estate by reason of orders made by Nicholas J in the Supreme Court of New South Wales, Equity Division, on 10 July 2009 in proceedings 2468 of 2008, plus some accrued interest. I am satisfied that that amount remains owing from Dr Liprini today. This is not disputed, except on the grounds which I shall examine below.
The petition relies upon non compliance with Bankruptcy Notice NN 4345 of 2009, which was issued on 21 September 2009 based upon the same judgment debt. Two affidavits of service of the bankruptcy notice were filed, one of which deposed to service of the bankruptcy notice in Dr Liprini’s letterbox on 2 October 2009, and asserted that this was sufficient service for the purposes of reg.16.01(1)(c) of the Bankruptcy Regulations. Another affidavit by a solicitor deposed to service by post, with the dispatch of the bankruptcy notice on 8 October 2009, thereby invoking reg.16.01(1)(a) and (2)(a).
Dr Liprini himself, when filing the application to set aside the bankruptcy notice on 3 November 2009, admitted having received service of the Bankruptcy Notice on 10 October 2009. At the hearing of the petition today, the creditor applied to amend paragraph 4 of the petition so as to rely upon the date admitted by Dr Liprini as the date from which time for compliance with the bankruptcy notice should be calculated. I am satisfied that in all the circumstances it is appropriate to allow the petition to be amended, so as to rely upon that date for service of the bankruptcy notice. In my opinion, no injustice results to Dr Liprini from that amendment. I have dispensed with re-verification and service of the amended petition.
The consequence of accepting 10 October 2009 as the date of service, is that compliance with the bankruptcy notice was required on or before 2 November 2009. I am satisfied that there was no such compliance, and therefore an act of bankruptcy occurred on that day.
The application to set aside the bankruptcy notice was filed in the registry on the following day, 3 November 2009. Registrar Segal then made an ex parte order purporting to extend time for compliance with the notice until 17 November 2009. However it is submitted, and I accept, that the effectiveness of that extension to overcome the act of bankruptcy occurring the previous day is open to doubt.
The principles of nunc pro tunc allow the Bankruptcy Court to overcome a failure to obtain an extension of time after commencing a proceeding in this court, so that an order for extension under s.41(6A)(b) may be backdated to the commencement of the proceedings or to some later date. However, these principles would not provide an effective remedy in the present case, where the act of bankruptcy had already occurred before the commencement of the application to set aside the bankruptcy notice. A power to extend time under s.41(6A)(a) might also have been available on the grounds that “proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor”, upon authorities that Dr Liprini’s then pending appeal from the judgment debt amounted to such a proceeding (see Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428). However, in my opinion the balance of authorities suggests that where the act of bankruptcy had already occurred by the expiration of the time fixed for compliance, before the commencement of any proceedings in this Court, it becomes futile to exercise any power of extension of time (see the authorities which I cited in Macquarie Leasing v Dekkan [2009] FMCA 349 at [13], being Hubner v Australia & New Zealand Banking Group Ltd (1999) 88 FCR 445 at 449, Rixon v Bryett [2001] FCA 433, and Skalkos v Tzovaras Legal Pty Ltd [2008] FMCA 543 at [21]).
Even if the Registrar’s order on 3 November 2009 was legally effective to extend time for compliance until 17 November 2009, no subsequent order was made in this Court purporting to extend time for compliance with the bankruptcy notice. Dr Liprini’s application sought an extension of time, and this was mentioned in directions hearings after the application was referred to me on 22 January 2010, without any extension being ordered. The creditor’s petition was undoubtedly filed at a time, being 15 January 2010, when no such order even purported to be operative. Therefore, if, contrary to my opinion, Registrar Segal’s order operated to extend time to 17 November 2009, an act of bankruptcy would have occurred on that date, and could be relied upon in the present petition for the purposes of s.43(1)(a) of the Bankruptcy Act.
In the circumstances of both proceedings, I directed that the application to set aside the bankruptcy notice be listed concurrently today with the hearing of the petition. Both the application to set aside and the petition were previously adjourned on several occasions to allow Dr Liprini’s appeals to be pursued in the Supreme Court, as I shall explain below.
Addressing Dr Liprini’s application to set aside the bankruptcy notice, I consider that it should be dismissed on two grounds. First, because no useful remedy could be granted under ss.40(1)(g) and 41(6A) or (7), in circumstances where an act of bankruptcy had already occurred before the filing of the application, assuming the validity of the bankruptcy notice. Secondly, by reason of the opinions which I explain below, as to the lack of merits of the substantive ground which was argued by Dr Liprini in support of his application. This ground was essentially the same ground upon which he opposed the petition. That is, that “in truth and reality” he does not owe any amount of money to his brother, and that the orders of the Supreme Court having that effect should not be enforced by this Court in its bankruptcy jurisdiction.
Dr Liprini also presented related reasons for opposing the petition and seeking a further adjournment of both matters. I shall explain below why I am unpersuaded that he has established any sufficient ground for going behind the judgments of the Supreme Court, or for doubting that they imposed personal liability upon Dr Liprini. I shall also explain why I decline to grant further adjourning to permit Dr Liprini to pursue further avenues of litigation in which he is hoping to challenge those judgments.

The consent orders made on 6 December 2007.

The background and course of the Supreme Court proceedings are best found in the judgment of Nicholas J given ex tempore on 10 July 2009. His Honour noted that proceedings under the Family Provision Act 1982 (NSW) were commenced by Kevin Liprini on 18 July 2006, naming Dr Liprini as defendant as the executor of their father’s estate, their father having died on 21 January 2005. Under their father’s will, his estate went in substance to their mother, and thereafter to Dr Liprini. After the commencement of the proceedings, their mother died on 26 November 2006. By that time, it appears that the father’s estate had been substantially distributed. The mother’s death had the effect of vesting Dr Liprini’s remainder interest in his father’s estate. He also inherited further substantial property from his mother under her will. There are suggestions in the evidence, that correspondence from Kevin Liprini after their mother’s death foreshadowed an intention by him to make a further claim for family provision in relation to the mother’s estate. However, no such claim was ever commenced.
On 6 December 2007, Dr Liprini was present at meetings with his then solicitor and barrister, in the course of a proceeding which was subsequently referred to as a ‘mediation’ conducted to explore settlement of the Family Provision Act proceedings. I infer that this was an expected, if not mandatory, occurrence in the case management of Family Provision Act matters in the Supreme Court, and it appears to have been presided over by a registrar or former judge. Both parties appear to have been represented by counsel and solicitors on that occasion, and the negotiations were conducted by them, without Dr Liprini meeting his brother.
Consent orders were signed by counsel for each party at the end of the mediation, in the following terms:
(1)Order under section 7 of the Family Provision Act that provision be made in favour of the plaintiff out of the estate of the late James Natale Liprini in the sum of $750,000;
(2)That the plaintiff’s costs agreed in the sum of $20,000 be paid out of the estate of the late James Natale Liprini, and
(3)Order that the defendant’s costs be paid out of the estate of the late James Natale Liprini on an indemnity basis.
The Court notes:
A.The above orders were signed by the parties in contemplation of a claim by the plaintiff against his mother’s estate under section 7 of the Family Provision Act. The plaintiff agrees to execute a deed, if called upon to do so, releasing the defendant (as executor of the estate of his late mother) from any claim under section 7 of the Family Provision Act
There is in evidence a handwritten memorandum made by Dr Liprini’s solicitor, presumably before his counsel signed the consent orders, which bears signatures which Dr Liprini does not deny are his, although he now claims to have no memory of signing them. It states:
Authority
I, Allen Stephen Liprini, the executor of the estates of James Natale Liprini and Anne Mary Liprini, of 220 Belgrave Esplanade, Sylvania Waters in the state of NSW, instruct my solicitor (Ricky Kerem) and Martin Rush (Barrister) to accept the plaintiff’s (Kevin Liprini) offer of $770k inclusive of legal costs.
I confirm Martin Rush (Barrister) advised me that if the matter was to proceed to the Supreme Court, the likely outcome would be a verdict to the plaintiff of between 300k to 1.2 million
According to the judgment of Nicholas J, the orders which were signed by counsel were subsequently “taken to have been entered when they were recorded in the Court’s computerised record section pursuant to UCPR Pt.36, r.36.11”.
Dr Liprini has tendered a letter he sent to Mr Kerem on the day after the mediation, in which he appears to confirm having agreed to the settlement, but expresses concerns about the mediation and dissatisfaction with the settlement. He referred to his memories of the event as being “unreal, dreamlike perhaps”, and claimed that he had been suffering from a dental condition. He said:
I was hoping to check off a few things with you, as I feel more strongly that my brother needs to be accountable for the things that he has done. It seems ridiculous that he collects $770,000.00 and all his allegations and deeds continue on uncontested. If anything, it has made everything worse for me, especially with how to explain this turn of events to Liz. So, I will try to reconstruct what was integral to the outcome of yesterday’s mediation session.
He then complains about having misconceptions about the purposes of the meeting, and complains that the options presented to him by his lawyers and the mediators were “Hobson’s choice”. Other complaints are made, and these have been subsequently repeated and embellished over the subsequent years. In circumstances which I referred to in my previous judgment, Mr Kerem and Mr Rush ceased to act for Dr Liprini soon after the consent orders were made.
Dr Liprini now challenges the consent orders made on 6 December 2007, with a number of contentions presented in an imprecise manner with little or no supporting evidence. He maintains that he was misled by his then lawyers about the mediation being a compulsory event, and about how he was induced to attend. He claims to have had an expectation only that it would be an opportunity for him to present a letter to his brother, which analysed their sibling relationships. He claims now that his health rendered his consent to the settlement suspect, and that he now has no memory of giving instructions to accept the settlement. He is convinced that, in fact, his brother was not in attendance at the mediation, since he never saw him and believes that he probably remained in North Queensland. In effect, he suggests that his consent was procured by fraud or serious professional misconduct on the part of his legal representatives.
The evidence presented to this Court provides little or no support for these contentions. I found it unnecessary, in my previous judgment, to arrive at any findings about the conduct of his legal advisors, when they were parties to that proceeding. The evidence in the present case is less extensive. I am inclined to think that it shows no more than a very difficult process of obtaining instructions from Dr Liprini, in the course of a mediated settlement of a highly emotionally charged Family Provision Act claim. In any event, I again consider that I do not need in the present case to decide whether the allegations made by Dr Liprini against his then solicitor and barrister are established. It is enough for me to note that insufficient substance has been shown in relation to those allegations to provide grounds for declining to accept the prima facie indebtedness arising from the judgments relied upon by Kevin Liprini in the bankruptcy notice and petition. Certainly, in my opinion, the evidence provides no substance for an allegation of complicity by Kevin Liprini, or his solicitors or counsel, in any circumstances vitiating the consent orders arrived at on 6 December 2007.
My assessment of the absence of any substantial evidentiary foundation for going behind the Supreme Court judgments, is assisted by Dr Liprini’s failure in subsequent years to properly present and pursue his challenge to the consent orders. As I shall explain, he made only belated applications to challenge those orders. Indeed, proceedings to set aside the 2007 orders were only commenced recently in a notice of motion filed in the Equity Division of the Supreme Court on 10 August 2010. This challenge was made by notice of motion in the 2006 proceeding, which is returnable for directions on 20 September 2010. Even assuming that such a notice of motion is an appropriate vehicle for challenging orders made and entered by consent signed by counsel, on the evidence before me its prospects are slim or non existent. In my opinion, the evidence presented to this Court does not show sufficient reason to go behind the consent orders, on principles referred to in Wren v Mahony (1972) 126 CLR 212 and Wolff v Donovan (1991) 29 FCR 480.

I arrive at this conclusion accepting that in some respects Dr Liprini has presented this Court with some additional material which was not previously presented to the Supreme Court in the course of Kevin Liprini’s efforts to enforce the consent orders. However, the additional evidence, as with most of the documents in which Dr Liprini has addressed the consent orders and the events of the mediation, is more focused upon his grievances about his successive legal representatives, than with identifying evidence which addresses the principles upon which consent orders may be subsequently set aside.
The relevant principle is found in Harvey v Phillips (1956) 95 CLR 235 at page 243 to 244:
…But in the case of a compromise which is made within the actual as well as apparent authority of counsel a court does not appear to possess a discretion to rescind it or set it aside. The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like. The rule appears rather from positive statements of the grounds that suffice (cf. Halsbury's Laws of England, vol. 26, 2nd ed., pp. 84, 85); but there is a dictum of LindleyL.J. which is distinct enough: " ... nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud but upon any grounds which invalidate the agreement it expresses in a more formal way than usual ... . To my mind the only question is whether the agreement on which the consent order was based can be invalidated or not. Of course if that agreement cannot be invalidated the consent order is good": Huddersfield Banking Co. Ltd. v. Henry Lister & Son Ltd at p.280.
In the application of these principles, even assuming that Dr Liprini can overcome the additional problem of the consent orders having been entered, he has not, in my opinion, presented evidence raising a real issue that the consent or a compromise entered into by his counsel acting under his both apparent and actual authority can be challenged on any of the contractual grounds referred to by their Honours. Certainly, I am not satisfied that there is sufficient substance for any such challenge to cause a Bankruptcy Court to go behind the consent orders, nor to go behind the subsequent order of Nicholas J which attempted to assist the enforcement of those orders.
Once I consider that Kevin Liprini is entitled to rely upon the terms of the consent orders to explain or establish the debt relied upon in the petition, I am not satisfied that discretionary reasons for declining to make a sequestration order or adjourning a petition under s.52.(2)(b) of the Bankruptcy Act arise from any of the circumstances of the mediation pointed to by Dr Liprini. Dr Liprini has certainly not, in my opinion, put material before the Court showing he has claims that deserve to be litigated further against Kevin Liprini or any other persons, including all or any of Dr Liprini’s own lawyers. This is applying either the “likely to succeed test” and also the “real claim test” required to support a further adjournment of the proceedings (see the authorities cited by Allsop J in in Totev v Sfar [2006] FCA 470, (2006) 230 ALR 23 at [37]‑[45]).

The orders of Nicholas J made on 10 July 2009

It is necessary now to consider the subsequent Supreme Court proceedings, in which Dr Liprini claims to have been frustrated in his efforts to challenge the consent orders of December 2006, and which he argues give rise to additional reasons for setting aside the bankruptcy notice or dismissing the petition. In particular, it is necessary to consider the orders of Nicholas J made on 10 July 2009, which Kevin Liprini relies upon as confirming or giving rise to a personal indebtedness on the part of Dr Liprini to pay the amount identified in the consent orders.
As is apparent from the consent orders signed by counsel, they followed the usual terms of orders under s.7 of the Family Provision Act 1982 (NSW), with a costs order payable out of the estate of the deceased father. In their terms, the consent orders imposed no personal liability on Dr Liprini to pay money out of his personal estate. Dr Liprini had been joined to the proceedings in his capacity as executor. No order was made under ss.24 and 28 designating as ‘notional estate’ any property distributed to Dr Liprini, from which provision for Kevin Liprini from his father’s estate was required to be made. Nor did the consent orders impose any personal obligations on Dr Liprini which were appropriately enforceable by way of proceedings for contempt of court orders, when he refused to make any payments to his brother.
This was the conclusion of Brereton J, who considered a contempt motion on 11 April 2008, and gave ex tempore reasons for dismissing it. After referring to authority explaining the nature of the usual orders in Family Provision matters, his Honour said:
[14]The cases which I have referred to make clear, if anything remained to be made clear in light of the terms of s 14, that an order made under the Family Provision Act for provision out of an estate is a unique form of order which in effect is not really a judgment or order of the Court at all. It has effect not as a court order, but as a codicil to the Will; and is to be enforced not as a court order but as a codicil, by the remedies which a beneficiary has against a defaulting executor. Such an order does not bind the executor, who is a defendant to the Family Provision Act proceedings, as an order for payment of money or to do an act or thing, but only in an indirect manner insofar as it imposes a new obligation in the trusts of the Will, to be enforced as such.
[15]In my view, such an order binds the executor directly to do nothing. I readily accept that interference with the carrying into effect of a court's order, even indirectly, can in an appropriate case amount to a contempt of court. But that depends fundamentally on the nature of the order in question. I do not see how interference with an order, the effect of which is not a binding command of the Court, but one having the effect of altering a Will, could be such a contempt. Accordingly, I do not see how disobedience to or interference with the performance of such an order could be such a contempt.
Kevin Liprini then commenced further proceedings in the Equity Division, to achieve enforceable orders against Dr Liprini personally. These proceedings were on foot for some time before coming to trial before Nicholas J on 9 and 10 July 2009. No counterclaim was ever filed by Dr Liprini challenging the consent orders made on 6 December 2007 on grounds of fraud or any contractual basis. However, at the commencement of the second day of the hearing, counsel for Dr Liprini applied for an adjournment of the hearing:
…in order to have the opportunity of challenging the orders that were made on 6 December 2007 on, as I understand it, some ground of incapacity referrable to his state of health at the time the orders were made and, implicitly, during the mediation process which resulted in the orders [which] were made.
This description of the application for adjournment is found in ex tempore reasons given by Nicholas J for refusing to adjourn, which are extracted in the subsequent judgment of Allsop P (see Liprini v Liprini [2010] NSWCA 126). Nicholas J formed the view that the adjournment application “is one without merit in the circumstances and must inevitably be refused”. His Honour thought Dr Liprini had been previously given “ample opportunity to raise such a challenge, with evidence to support it, in the past”.
Nicholas J then completed the proceedings, and made orders which were eventually entered in the following terms:
1.A declaration that on its true construction the effect of the orders made on 6 December 2006 that the sums for payment therein would be payable:
a)From the estate of the late James Natali Liprini; and
b)From the estate of the late Anne Mary Liprini,
and that the Defendant would be personally liable for the payment of those sums to the Plaintiff;
2.An order under Rule 54.3 of the Uniform Civil Procedure Rules that the Defendant pay to the Plaintiff the sum of $770,000.00;
3.An order that interest be paid by the Defendant to the Plaintiff from 3 January 2008 to date at the rate prescribed by section 84A of the Probate and Administration Act 1898 (NSW) in the sum of $67,500.00;
4.An order that the Defendant pay the Plaintiff’s costs of these proceedings (such costs not to include the costs of preparation for all alternative grounds of relief as set out at paragraphs 3, 4 and 5 of the Summons filed herein) on a party and party basis;
5.Each party to pay their own costs of preparation for all alternative grounds for relief as set out at paragraphs 3, 4 and 5 of the Summons filed herein;
6.The balance of the Plaintiff’s Summons dismissed; and
7.The Plaintiff to have liberty to apply for further consideration by Notice of Motion on 7 days’ notice in the event that the Defendant breaches or otherwise fails to comply with the above orders.
I raised an issue which has never been pursued by Dr Liprini in the bankruptcy proceedings, but which initially caused me some concern. This was whether, in the light of the opinion of Brereton J as to the effect of the consent orders, the orders made by Nicholas J should be understood as imposing a liability in debt personally on Dr Liprini, rather than imposing only a personal obligation to execute his responsibilities as executor of both the identified estates. The jurisdiction exercised by Nicholas J in relation to ‘administration proceedings’ under UCPR Pt.54, might arguably suggest that Nicholas J’s orders provided no more than a foundation for repeating the motion for contempt, and did not impose a personal liability in debt on Dr Liprini’s personal estate. If so, then it might appear that Kevin Liprini’s proceedings under the Bankruptcy Act were misconceived.
The structure of the Bankruptcy Act suggests that a creditor’s remedies by way of bankruptcy notice and creditor’s petition under Part IV are not available in relation to enforcement of indebtedness owed by a deceased person’s estate, or incurred by an executor acting in that capacity, even where an executor is under a personal duty to pay estate debts from property of the estate. The Bankruptcy Act in Part XI provides a separate remedy to creditors of estates, which does not involve the service of a bankruptcy notice or the bringing of a creditor’s petition directed at an executor in relation to his or her personal estate.
I expressed this opinion in Liprini v Kerem & Anor(No. 2) [2010] FMCA 244 at [25], and subsequent reflection causes me to remain of that opinion. The second case I refer to in [26], being Austrust Trade & Anor v Estate of the Late Evan Schomburgk Herbert & Anor [1998] FCA 1621, in fact illustrates that a costs order made against an estate is appropriately pursued by way of petition under s.244 rather than by way of creditor’s petition under Pt.IV. The history of Commonwealth legislation in relation to insolvent estates also points to the absence of any personal liability on an executor enforceable by bankruptcy proceedings against the executor personally (see Levy v Kum Chah (1936) 56 CLR 159 at 173 and Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 312). Moreover, on general principles which segregate the property of a deceased person’s estate being administered by an executor, the remedies of a beneficiary of a Family Provision Act order might appear to lie more in requiring execution by an executor of his executorial duties, through avenues of equitable relief rather than by a bankruptcy notice and petition addressed personally at the executor.
However, the orders made by Nicholas J directed at Dr Liprini expressly invoked powers conferred by UCPR r.54.3 which are unfettered in their terms. In the absence of any argument to the contrary, I would not conclude that the Rules did not allow the imposition of a personal liability in debt on an executor. The present order no.2 made by Nicholas J is open to that construction. Moreover, it is explained by the declaration made in paragraph 1 which, in its terms, recognises a “personal liability for the payment of those sums to the Plaintiff”. This suggests to me that the order which is now relied upon to support the present bankruptcy notice and petition was one made against Dr Liprini personally in relation to his personal estate, rather than one made against him in his capacity as executor in relation to the estates of either his father or his mother.
Confirmation that this was the intent of the order if there is ambiguity may, in my opinion, be found in the extempore judgment of Nicholas J given on 10 July 2009 (cf Repatriation Commission v Nation (1995) 57 FCR 25 at 33), and the circumstances which he explained. His Honour referred to paragraphs 1 and 2 of the summons, which he then addressed in his judgment:
2. By summons filed 23 April 2008, the plaintiff claims an order that the defendant pay to the plaintiff the legacy of $770,000 being the agreed settlement in proceedings numbered 3790/06, an action brought under the Family Provision Act 1982 against the defendant as executor of the estate of the late James Natale Liprini. Alternatively, a declaration is sought that in the circumstances, the defendant is personally liable to the plaintiff for the settlement of such sum.
After examining the history of the matter, and referring to r.54.3, Nicholas J referred to extrinsic circumstances in relation to the estates of the father and of the mother, and of the distribution of property to Dr Liprini from both estates which explained the consent orders. His Honour then construed the consent orders:
[27]The orders for the purpose of construction should be read and understood as a whole. Their language is plain and unambiguous. The short minutes resulted from a mediation in which the parties and their lawyers participated. It may be assumed that in that exercise they had regard to their statutory duty under s.27 Civil Procedure Act to participate in good faith. It follows, in my opinion, that it may be reasonably inferred, just as the parties intended, that the defendant agreed to be bound to procure the fulfilment of the agreement on his part. As I have indicated, it is necessary to consider the orders as a whole. In my opinion in unambiguous language, they demonstrate the intention of the parties to resolve the then present claim, as well as any potential claim against the mother’s estate, which is self evident from the terms of the agreement which was incorporated in the short minutes referable to a potential claim by the plaintiff against the mother’s estate. It follows, in my opinion, that the parties proceeded as a consequence of the mediation process on the assumption and with the intention that the defendant would take such steps as were necessary to honour the agreement he had made, which would involve drawing on the assets in the mother’s estate if need be.
[28]Finally, in my opinion, it was intended by these orders that the plaintiff would receive a total sum of $770,000 in settlement of claims against both estates of which the defendant, as executor, was in control. It follows, that by agreeing to these orders, the defendant was effectively agreeing to arrange for the provision of the appropriate amounts.
[29]Accordingly, I am satisfied that the plaintiff is entitled to the relief claimed in prayers 1 and 2 of the summons presently before me.
Although it is not beyond argument, in my opinion, the orders of Nicholas J, when construed in the light of his Honour’s judgment, did give rise to a personal indebtedness by Dr Liprini, which was enforceable by way of bankruptcy notice and the present petition against Dr Liprini and his personal estate. Dr Liprini did not present any arguments to me in relation to this issue, and attempting as well as I can to identify arguments which could have been made by him had he been represented, I am not persuaded that Kevin Liprini’s invocation of Part IV of the Bankruptcy Act was misconceived, so as to result in the invalidity of the bankruptcy notice or petition on that ground.
The focus of Dr Liprini’s challenge to the orders of Nicholas J is that his new lawyers who represented him before Nicholas J, failed to accept his instructions or to pursue them in a timely fashion by mounting a challenge against the consent orders made on 6 December 2007. In support of his criticisms, he presents to the court a transcript of two conferences with those lawyers, and claims that it provides evidence that his instructions were ignored.
I am not satisfied that his instructions were ignored. Rather, there appears to me to have been great difficulty on the part of Dr Liprini in understanding the points which his lawyers were attempting to draw to his attention, in relation to the difficulties of challenging the consent orders on the instructions and evidence they had been given. They are not parties to the proceedings, and I do not consider that I am in a position to make any confident findings as to the conduct of Dr Liprini’s then lawyers. On the material before me, I can see little prospect of any successful claims being pursued against them in relation to their conduct. Certainly, no sufficient basis is shown for these claims to cause me to consider further adjourning the petition to allow them to be pursued by Dr Liprini.
Moreover, their conduct is not attributable in any manner to the present creditor, Kevin Liprini. There is no material presented by Dr Liprini which shows any involvement by Kevin Liprini or his solicitor or barrister in any misdeeds on the part of Dr Liprini’s own lawyers in the proceedings before Nicholas J, which would provide grounds for declining to make a sequestration order or going behind the judgment of Nicholas J under the principles I have referred to above.
Further reasons for declining to go behind Nicholas J’s orders are found in Dr Liprini’s subsequent efforts to appeal from those orders. As I have noted above, the present petition was adjourned over many months to permit Dr Liprini to pursue his appeals. I thought it appropriate to allow those adjournments, notwithstanding that I was not confident that the appeal was “based on genuine and arguable grounds”, see Adamopoulos & Anor v Olympic Airways SA & Anor (1990) 95 ALR 525 at 531. I did, however, think that it was possible that the Court of Appeal might clarify whether Nicholas J’s orders imposed a personal liability in debt, as distinct from a personal liability to perform duties as an executor. In the event, such clarification did not emerge, and Dr Liprini’s appeal was dismissed on grounds of his failure to comply with numerous directions for the preparation of his appeal.
The appeal was dismissed by Allsop P on an application for summary dismissal brought by Kevin Liprini. In an ex tempore judgment on 24 May 2010, his Honour noted Dr Liprini’s claims that Nicholas J had wrongly declined to consider his challenge to the consent orders and what had happened at the mediation on 6 December 2007. Allsop P said:
9….Apart from continuing with extremely serious allegations against his former legal advisers the submissions do not identify any coherent basis for attack of either the discretion of His Honour to refuse the adjournment or the orders that were made.
….
10. What I understand to be the position from everything he has said today and from what I take from the material, is that Dr Liprini’s real complaint is that there was a fraud of some character committed upon him at the mediation. To the extent that he seeks to attack the orders of Nicholas J those matters are only relevant to the extent that His Honour might be seen to have erred in failing to give an adjournment. No grounds of appeal and no aspects of the written submissions identify any rational basis to consider that the discretion exercised by Nicholas J to refuse the adjournment in any way legally miscarried. In these circumstances, I see no basis for considering that the appeal has any real prospects of success.

For those reasons, his Honour dismissed the appeal. His Honour noted, however, that his dismissal was interlocutory, and suggested that Dr Liprini could make further applications if he were “able at any point to bring forward a coherent basis to impugn the orders made by Nicholas J”.
Acting upon that invitation, Dr Liprini did apply for a review of Allsop P’s orders, and that application for review was heard and decided by Beazley, Giles and Handley JJA on 28 June 2010. Only some pages of the transcript of proceedings on that occasion are before me, but they show clearly that the three Justices were unable to detect any arguable error in the proceedings of either Nicholas J or Allsop P. They refused the application for review.
Dr Liprini said today that he would like to reapply for reinstatement of his appeal from the orders of Nicholas J, and that he expects to do this if he is successful in his equity proceedings to set aside the consent orders made on 6 December 2007. However, in my opinion, his prospects of successfully reinstating his appeal are remote. For reasons I have given above, he at present does not have a factual case which, in my opinion, holds prospects of setting aside the 2007 consent orders, even if he does not encounter jurisdictional difficulties in his present notice of motion. I consider that Dr Liprini has now been given more than ample time to demonstrate to the Supreme Court an evidentiary foundation for challenging both the 2007 consent orders and the orders of Nicholas J, and that he has failed to do this.
I am also not satisfied that he has any prospects for further appeal which can be described as being “based on genuine and arguable grounds”, so as to support a further adjournment of the petition. For that reason, and taking into account the outcome of his past efforts to appeal, I decline to go behind either of the judgments of the Supreme Court, and I also decline a further adjournment of the petition.
Dr Liprini today submitted further considerations for an adjournment of the petition, but which also might appear to bear on the discretion available to the Court under s.52(2)(b) to decline to make a sequestration order. He pointed to his desire to continue the litigation which he has recently commenced to challenge the consent orders of December 2007, and Nicholas Js orders of 10 July 2009. He argued that, although he may not yet have sufficient evidence, he hopes to be able to find evidence. However, it is unclear where he expects to find better evidence which would provide a foundation for challenging those orders. I can at present see no prospects that he will be better able to present such a case in the future, than he has been able to present in the last year.
Dr Liprini also points to other litigation which is pending in relation to the unpaid legal fees of some of his lawyers. It appears that the debts which I addressed in my earlier judgment are still outstanding, and I note that those creditors have appeared as supporting creditors in today’s proceedings. There is no evidence that Dr Liprini has taken any further steps to challenge their debt.
There are pending proceedings in the District Court, in which Dr Liprini challenges a costs assessment of his later solicitors. Those proceedings appear to have been adjourned recently to await the outcome of today’s proceeding. There may be other proceedings also on foot. I have taken into account that litigation, but I do not consider that it provides a sufficient reason for declining to make a sequestration order today. Indeed, I have arrived at a conclusion that it is in the interests of all of Dr Liprini’s creditors, including those who he is refusing to pay as a result of his grievances about his past litigation with Kevin Liprini, that a sequestration order be made today, and that the future of his litigation, in all courts, should pass to the consideration of a trustee in bankruptcy.
In arriving at that conclusion, I have given careful consideration to Dr Liprini’s evidence about his health and state of mind. There are in evidence before me, at least two reports from a treating clinical psychologist, Mr Borenstein, including a recent report dated 24 August 2010. The second last paragraph of the report indicates Dr Liprini’s current symptoms, which partly explain his difficulty with managing complicated legal matters. That difficulty has been apparent in Dr Liprini’s presentation of his case when has been appearing in front of me, and was apparent today.
I can see little prospect that Dr Liprini’s mental health will improve in the future to allow him better to present his case to this Court or other courts. Dr Liprini appears to be obsessed with his opposition to his brother’s claims, and there seems little prospect that his obsession will dissipate or allow him to assess his situation objectively. I also note that Dr Liprini has referred to other health difficulties which have surfaced from time to time, and also to personal considerations which he considers have impeded him from better pursuing his challenges to the orders obtained by Kevin Liprini.
I have taken into account all those matters, including Dr Liprini’s strong desire to continue to resist his brother’s claims, and the strength of his belief that he has suffered injustice at the hands of the legal profession and previous judges in the matter. However, I have not been persuaded that the public interests which inform the exercise of the discretion under s.52(2) are in favour of this Court declining to exercise its jurisdiction today. As the authorities cited by Allsop J in Totev v Sfar (supra) have established, a creditor has a prima facie right to have a sequestration order made once the Court is satisfied as to the matters required to be proved under s.52(1). In my opinion, Kevin Liprini is now entitled to obtain a sequestration order based upon the judgments which he has obtained against Dr Liprini.
When considering the discretion in s.52(2), I have been concerned that Dr Liprini has presented to the Court no evidence of his financial position, in particular as to his ability to pay the claims which he has been resisting. There is evidence that he has received substantial inheritances in the past, but there is no evidence as to his current personal estate and whether he is solvent or not. He has not opposed the petition on the ground of ability to pay his debts in terms of s.52(2)(a). In that situation, in my opinion, the prima facie entitlement of the creditor to seek enforcement of the Supreme Court orders by way of insolvency administration should be recognised, and given effect. If Dr Liprini, in fact, is found to have the means to pay all his creditors, then he may be able to terminate his insolvency under s.153A of the Bankruptcy Act.
At the conclusion of submissions before lunch, I raised with Dr Liprini and the solicitor for Kevin Liprini the staying of a sequestration order for 21 days pursuant to s.52(3), to allow Dr Liprini to consider his position generally. The making of an order under s.52(3) was not opposed and in all the circumstances I have decided to make such an order. I recommended that Dr Liprini should consider whether he can avoid additional expenses and inconvenience of an insolvency administration by reaching agreement with his creditors. If he wishes to pursue his litigation with his brother and former lawyers by appealing my order, he will need to consider applying for a further stay from the Federal Court.

I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate:

Date: 16 September 2010