Milostnik v Jabbour
[2008] FMCA 1540
•14 November 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MILOSTNIK v JABBOUR | [2008] FMCA 1540 |
| BANKRUPTCY – Creditor’s Petition – respondent debtor’s opposition to Petition – serious differences in affidavit evidence between the parties – Applicant Creditor in nursing home and unable to appear and give evidence – hearing limited to issue of solvency – Respondent Debtor found to be solvent – Creditor’s Petition dismissed. |
| Bankruptcy Act 1966 (Cth), s.52(2)(a) |
| International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 Sarina, Re; Ex parte Wollondilly Shire Council (1980) 43 FLR 163 Sandell v Porter [1966] HCA 28 Sarina v Wollondilly Shire Council (1980) 48 FLR 372 |
| Applicant: | ALOYZ MILOSTNIK |
| Respondent: | MOUNIRA JABBOUR |
| File number: | SYG 3880 of 2007 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 25 August 2008 |
| Delivered at: | Sydney |
| Delivered on: | 14 November 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr G. Giagios |
| Solicitors for the Applicant: | Scarfone & Co |
| Counsel for the Respondent: | Ms P. Thew |
| Solicitors for the Respondent: | Grace Lawyers Pty Ltd |
ORDERS
These proceedings initiated by the filing of a Creditor’s Petition on 19 December 2007 are dismissed.
The petitioning creditor pay the costs of the respondent debtor of these proceedings as agreed and, in the absence of agreement, taxed in accordance with the Federal Court Rules (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3880 of 2007
| ALOYZ MILOSTNIK |
Applicant
And
| MOUNIRA JABBOUR |
Respondent
REASONS FOR JUDGMENT
The proceedings
Aloyz Milostnik, the applicant creditor, filed a Creditor’s Petition on 19 December 2007 in the following terms:
(i) The respondent debtor owes the applicant creditor the amount of $37,463.28 for:
In respect of the judgment obtained in the Local Court of New South Wales at level 5, the Downing Centre, 143-147 Liverpool St, Sydney in matter number 13651 of 2005, plus interest, judgment having been entered on 3-03-2006 in the amount of $32,444.30 and such a judgment not having been satisfied.
(ii) The following act of bankruptcy was committed by the respondent debtor within six months before the presentation of the petition:
The respondent debtor failed to comply on or before 26-11-2007 with the requirements of a bankruptcy notice served on her on 05-11-2007 or to satisfy the Court that she had a counter-claim, set-off or cross demand equal to or more than the sum claimed in the bankruptcy notice, being a counter-claim, set-off or cross demand that she could not have set up in an action in which the judgment referred to in the bankruptcy notice was obtained.
A Notice Stating Grounds of Opposition to the Petition was filed by Mounira Jabbour, the respondent debtor, indicating that she opposed the Creditor’s Petition on the following grounds:
(i) pursuant to s.52(1)(c) of the Bankruptcy Act 1966 (Cth) (“the Act”) the Court should not be satisfied that the judgment debt, upon which the bankruptcy notice and creditor’s petition were founded, is not still owing;
(ii) that in all material times, the respondent has been able to pay her debts and is solvent within the meaning of s.52(2)(a) of the Act; and
(iii) that the bankruptcy notice (NN4195 of 2007) be set aside.
The matter was referred to this Court by Hedge R on 17 June 2008. On that date Mr Giagios for Mr Milostnik advised that Mr Milostnik may not be able to attend Court and give evidence. Mr Milostnik was a resident of a Lakemba aged care facility and a medical report was being prepared indicating that his evidence may need to be taken at the home. Consequently the matter I adjourned the matter to 25 August 2008.
Interim application
On 19 August 2008 Scarfone & Co, solicitors representing Mr Milostnik, filed an interim application seeking the following interim orders:
(i) That pursuant to r.10.01, the cross-examination of Aloyz Milostnik on his affidavit of 27 May 2008 take place and be heard at Algrove Aged Care facility, 35 Yerrick Road Lakemba, NSW.
(ii) That in alternative to order 1 above pursuant to r.15.29 the Court dispensed with the attendance of Aloyz Milostnik for cross examination of his affidavit sworn 27 May 2008 and the said affidavit be used and taken into evidence without the sAloyz Milostnik being cross examined on the affidavit.
(iii) Such further and other orders as the Court may direct.
The supporting affidavit of Santo Scarfone, solicitor, sworn on 18 August 2008 states:
6. The applicant is 86 years of age and is a permanent resident in a nursing home, Algrove Aged Care facilities at Lakemba. He is bedridden and suffers from a number of significant disabilities which affect his ability to (a) attend a Court and (b) to be cross examined on his affidavit.
7. Annexed and marked “A” is a letter dated 15 August 2008 from Dr D. Hor, the applicant’s treating doctor.
Dr Hor’s letter indicates that Mr Milostnik was admitted into his care in early 2006 and that he suffers from severe vascular disease resulting in poor circulation in his legs. Due to his condition he is bedridden and is completely unable to walk. Mr Milostnik also has MRSA (Methicillin-resistant Staphylococcus aureus) which is contagious and requires him to be isolated to prevent infecting other people. He is also affected by severe deafness and even with a hearing aid communication is often difficult. Dr Hor indicated that all Mr Milostnik’s conditions are permanent and it is not possible for him to attend Court.
Hearing of solvency issue
At the commencement of the hearing, Mr Giagios advised the Court that other witnesses were required for cross-examination and that the hearing could proceed with the evidence of Mrs Jabbour and her objection to the Creditor’s Petition. If necessary, Mr Milostnik’s evidence could be taken from the nursing home at a later date. Alternatively, the matter could be split into two distinct parts with this hearing being confined to the issue of Mrs Jabbour’s solvency.
Ms Thew, for Mrs Jabbour, agreed with this proposal. In the circumstances I indicated that the hearing would only address the ground of solvency and that I would hear Mrs Jabbour’s evidence on that discrete issue.
Background
I rely on the affidavit of Mrs Jabbour sworn on 18 April 2008 to establish the background in relation to this matter. This affidavit headed “Payment of Debt” has been filed in these proceedings but was not read in respect of solvency. The affidavit is relied on only to establish the background to the overall proceeding and the content and the issue of solvency.
Mrs Jabbour and her husband, Habib Jabbour, purchased a property at 68 Wardell Road Earlwood in about 1979. Mr Milostnik and his wife resided in a house across the road. Initially Ms Jabbour leased her property but went there regularly to collect rent from the tenants. During this time she came to know Mr Milostnik and his wife. Mrs Jabbour understood that Mr and Ms Milostnik were in fact divorced but continued to reside together.
In about 1986, Mrs Jabbour ceased leasing her property and took up residence with three of her children, James, Matthew and Joanne. By 1989, Mrs Jabbour had become close friends with Mr and Mrs Milostnik. In late 1992, Mr Milostnik had a by-pass operation on his leg and Ms Jabbour drove Mrs Milostnik to hospital for visits and drove her so she could do to her shopping. Upon Mr Milostnik’s release from hospital, Ms Jabbour drove him to medical appointments, helped with the garden, washed up for them several times a week and brought sundry items each day. This continued until about 2002. In return Mr Milostnik, gave Mrs Jabbour and her children gifts.
In 2002, Mrs Milostnik moved to a nursing home because she was suffering from dementia. Several months later Mr Milostnik had a fall and broke one of his hips requiring six to seven weeks hospitalisation. Mrs Jabbour visited Mr Milostnik twice a day in hospital. During this period, Mr Milostnik gave Mrs Jabbour the keys to his house with the request to keep it secure. Mrs Jabbour states that she was given access to some of Mr Milostnik’s assets and that she would bring cash, his bank book and pyjamas to him in hospital.
On Mr Milostnik’s release from hospital, Mrs Jabbour prepared his meals three times a day and cleaned his house twice a week, did some gardening, paid his insurance and other bills and purchased his medication. This continued into 2005. Mrs Jabbour claims that during this time, she had unrestricted access to the Mr Milostnik’s bank book and saw that he had about $54,000 in his account. In early 2005, Mrs Jabbour assisted Mr Milostnik in arranging an overseas holiday and withdrew approximately $36,000 from his account to pay for the airfare and holiday expenses.
In about March or April 2005, Mr Milostnik went to Europe for about two months. Prior to his departure he gave Mrs Jabbour power of attorney over money he had in a Commonwealth Bank account at Earlwood.
At this time Mrs Jabbour’s daughter, Joanne, was preparing for marriage but the family was experiencing difficulties in paying for the wedding. Mrs Jabbour then approached Mr Milostnik for financial assistance. Mrs Jabbour claims that before Mr Milostnik departed Australia, he invited her to draw from his account money she required to pay for Joanne’s wedding.
Mr Milostnik returned from Europe in late June 2005. Mrs Jabbour states that shortly thereafter police visited her home and informed her son that she would be charged with theft in relation to the money that she withdrew from Mr Milostnik’s bank account. On 21 July 2005 Mrs Jabbour executed an Acknowledgment of Debt in the sum of $29,380 in favour of Mr Milostnik.
Some time in August 2005 after Joanne returned from her honeymoon, Mrs Jabbour advised her that Mr Milostnik wanted the borrowed money returned. The following day Mrs Jabbour and her daughter visited Mr Milostnik and paid him the sum of $23,600 – being $22,000 in cash received as gifts from family and friends for the wedding and $1,600 of Mrs Jabbour’s money. She states that a further $7,000 would be paid at a later date.
In about September or October 2005 Mr Milostnik commenced residing at the same nursing home as his wife. In January 2006, Mr Milostnik filed a Statement of Claim in the Local Court of New South Wales seeking repayment of $29,830 from Mrs Jabbour. Mrs Jabbour states that she was not served with a Statement of Claim and was unaware of the listing on 3 March 2006. Therefore she neither filed a defence nor attended the hearing. On that date a default judgment was entered against Mrs Jabbour. On 9 May 2006, Mr Milostnik had served a Bankruptcy Notice on Mrs Jabbour in respect of the judgment debt. She claims it was at this time that she became aware of the hearing and the default judgment.
Evidence
The following evidence was filed in respect of the issue of solvency: Affidavit of Mounira Jabbour (“Solvency”) sworn on 18 April 2008. The affidavit was read except for paragraph 23. Mrs Jabbour was cross-examined on that affidavit (transcript pp.5-21, Exhibit “R1”).
Submissions
Mr Giagios and Ms Thew both made submissions in respect of Mrs Jabbour’s income which was extrapolated from her “Solvency” affidavit (Exhibit “R1”). This has been converted to a fortnightly income for ease of calculation and is conveniently summarised as follows:
· Carer payment $528.00
· Pharmaceutical allowance $5.80
· Pension base supplement $18.80
· Carer allowance $100.60
· Family Tax Benefit Part A $80.45
· Family Tax Benefit Part B $68.42
(paragraph 2)
· Allowance from husband $526.17
(paragraph 6)
· Board from three sons $400.00
· Board from Mr Tarbi $136.00
$1,864.24
This is, alternatively, $962.12 per week.
Ms Jabbour’s anticipated expenses for a three month period (based on her expenses from the previous quarter) are set out in paragraph 9 of her “Solvency” affidavit as follows:
Water $278.00
Gas / electricity $434.00
Telephone (landline) $187.00
Telephone (mobile) $90.00
Groceries $2,400.00
Rates $450.00
Car insurance $300.00
Home and content insurance $240.00
Car repayments $711.00
Car registration $84.00
Petrol $360.00
Social (wedding present, going out) $400.00
Clothes / shoes $850.00
School fees (government school) $50.00
That is approximately $525.70 per week.
Based on the calculations above, Mrs Jabbour has approximately $406.42 per week over and above her outgoings. Both parties arrived at slightly different figures, however, the variation is not significant. Submissions in respect of the significance of these figures are considered below.
Mrs Jabbour lists her assets at [11] of her “Solvency” affidavit, with the major asset being her share of the family home at 68 Wardell Road, Earlwood. This property is owned as a joint tenancy between Mrs Jabbour and her estranged husband. This affidavit estimates Mrs Jabbour’s total assets to amount to a minimum of the total in the Wardell Road property, her car, household contents and case. Mrs Jabbour’s liabilities at the date of making the affidavit are the Wardell Road property and her car.
Mr Giagios submits that the joint tenancy could be severed if necessary and with Mr Jabbour’s consent. However, Mrs Jabbour’s evidence in cross examination indicates that her husband would not agree to this nor did she contemplate selling the property. Mr Giagios referred to a will made by Mrs Jabbour in the 1970s when she only had one child. The executor of the will is Mrs Jabbour’s brother-in-law (a possibly trustee) and the will has never been revoked or changed. The will is not before the Court and it is not possible to determine what the arrangements were. In particular, whether the will in fact created a trust and placed beneficial interest in the property with the children. It seems from Mrs Jabbour’s evidence that this was probably the case. Her testimony suggests that the will automatically took into account each of the children, that a trust was created for each of them and that they have a 100% interest in the property.
Mr Giagios contends in respect of the Wardell Road property that:
a)On the balance of probabilities, the property cannot be liquidated for the debt to be paid;
b)There is no suggestion that the will which creates a beneficial interest in the home to the children will be revoked;
c)The joint tenancy will be severed.
Consequently, the primary asset that is said to be able to fulfil the debt cannot in fact be utilised.
Ms Thew submits that Mrs Jabbour’s evidence does not establish that her estranged husband would never consent to selling the house. Her evidence was that she had promised him she would never sell the house. There is also no evidence that a trust has been created such that until either Mr or Mrs Jabbour or passed away, the house could not be liquidated. Ms Thew submits that the applicant has not issued a subpoena in relation to the will.
Mr Giagios submits that if a loan was sought to be secured against the property, Mr Jabbour would need to consent or at least give some form of guarantee. However it is more likely that he would enter as a mortgagee himself. It is submitted that it is unlikely that a financial institution would permit the unusual practice of separating those interests. Further, that there is no evidence that Mrs Jabbour would give her consent and therefore there is no evidence that the loan could be raised against the property. With regard to the fact that Mrs Jabbour’s stated income exceeds her outgoings by only $405.00 a week, her prospects of upkeeping a mortgage or even obtaining one are remote. Mr Giagios submits that Mrs Jabbour’s affidavit does not indicate what, if any, loan can be raised against the Earlwood property. He contends that Mrs Jabbour is unable to establish that the Wardell Road property is an asset that can be either realised or utilised to pay the judgment debt.
Ms Thew submits that Mrs Jabbour stated in cross-examination that she was willing to borrow money against the house if she had to. Ms Thew relied on Re Sarina; ex parte Wollondilly Shire Council (1980) 43 FLR 163 which establishes that it is not the willingness of a debtor to satisfy her debts, but her ability to do so. She contends that Mrs Jabbour was, as at the date of the hearing, able to satisfy her debt based on her evidence of her outgoings, income, assets and liabilities. Further, that if she refused to do so the creditor can seek other avenues of recovery. Ms Thew submits that Mrs Jabbour did not indicate that she would not, if need be, be able to obtain her husband’s consent to borrow money against the house. Instead she clearly stated that she would and could borrow money against the property.
Mr Giagios then addressed the residual assets, being a car valued at about $10,000 and $30,000 of household contents. He suggests that a sale of those assets would not realise $30,000 and that there would be a car worth about $10,000 and some household effects. It is submitted on this basis that even if all these assets were sold, recovering up to $30,000 and including available cash of $405.00 per week, Mrs Jabbour is not solvent and is unable to satisfy the Court as to her solvency. In those circumstances part of her objections in these proceedings should be dismissed.
Mr Giagios submits that the evidence regarding Mrs Jabbour’s late father’s property in Lebanon is vague and Mrs Jabbour was unrealistic in what she thought she may realise from its sale. He submits that this evidence should not be relied upon in establishing her solvency.
Ms Thew submits that Mrs Jabbour indicated she did not know the amount she would inherit. She explained that this uncertainty was due to the exchange rate between Lebanese and Australian currencies and guessed that it could be between $360,000 and $400,000.
Ms Thew submits in relation to the remainder of Mrs Jabbour’s assets that her evidence was that even if the household’s contents were discounted to $30,000 (her best estimate), that and the value of the car would still cover the judgment debt. Ms Thew again repeated that the test was not whether Mrs Jabbour was willing to pay the debt but whether she could.
Consideration
In my view and on a proper application of the authorities, the Court is required to analyse the evidence and determine whether in fact Mrs Jabbour is able to pay her debts. The Creditor’s Petition (reproduced at [1] above) claims an amount of $37,463.28 based on the judgment debt obtained in the Local Court on 3 March 2006 in the amount of $32,440.30 including interest. In Mrs Jabbour’s affidavit sworn on 18 April 2008, which was filed but not read in respect of this hearing as to solvency, Mrs Jabbour states at [27] that she executed an Acknowledgment of Debt on 21 July 2005 in the sum of $29,380.00 in favour of Mr Milostnik.
On the discrete issue of solvency, Mrs Jabbour seeks the Court’s discretion pursuant to s.52(2)(a) of the Bankruptcy Act 1966 (Cth) not to make a sequestration order based on the following reasons:
(ii) That in all material times, the respondent was able to pay her debts and is solvent within the meaning of s.52(2)(a) of the Act.
The decisions in Sandell v Porter [1966] HCA 28, Sarina, Re; Ex parte Wollondilly Shire Council (1980) 43 FLR 163 and Sarina v Wollondilly Shire Council (1980) 48 FLR 372 make it clear that if it can be established that a debtor is able to pay all the debts he/she owes within a reasonable time, then he/she should not be subject to a sequestration order. This evaluation does not necessarily involve a simple balance sheet assessment of assets against liabilities, nor does it require a debtor to have sufficient cash on hand to pay all creditors in full and immediately if the debtor has other assets.
In Sandell v Porter (supra), Barwick CJ (with McTiernan and Windeyer JJ agreeing) stated in relation to funds being available to the debtor to pay his/her debts for solvency purposes, that it is:
15. …not limited to his cash resources immediately available. They extend to monies which he can procure by realisation by sale or by mortgage or by preach of his assets within a relatively short time – relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor…
The essential requirement, well established by authorities, is that the debtor must prove that she can pay debts as they fall due. The meaning of “being able to pay all debts” was considered in International Alpaca Management Pty Ltd v Ensor [1999] FCA 72:
[11] In Bank of Australasia v Hall (1907) 4 CLR 1514, at 1527, Griffith CJ construed the phrase "unable to pay his debts as they become due" as it appeared in certain provisions of the Insolvency Act of 1874 (Qld). (In the context, the word "due" in that phrase seems plainly to have meant "payable".) His Honour (with whom Barton J agreed (see at 1531)) said that "the debts referred to [in the phrase] are not his debts 'then' payable, but his debts 'as they become due' -- a phrase which looks to the future", as well, obviously, as to the present. His Honour added that it was only the "reasonably immediate" future which was looked to in that connection. That construction was given to the phrase in repelling an argument that "only debts then actually payable and the amounts of which were then actually ascertained should be taken into consideration" in deciding whether, on a particular day, a person was unable to pay his debts as they became due. (For a case expressly applying the approach of Griffith CJ to similar words, although in a corporate, rather than an individual, insolvency context, see Leslie v Howship Holdings Pty Ltd (1997) 15 ACLC 459 at 466 (Federal Court of Australia, Sackville J).)
[12] Yet other provisions of the Act (see, for example, para124(3)(a)) speak of a person's having been unable to pay that person's debts as they became due from that person's own money. That formulation is different again from those already mentioned, because it expresses the idea of the (in)ability of a person to pay that person's debts as they become due (which, in the context, seems plainly to mean payable, as I have already pointed out in connection with the similar Queensland provisions under consideration in the Bank of Australasia Case) from that person's own money.
[13] A question arises what is a person's own money in the context of provisions like those referred to in the preceding paragraph of these reasons. In Sandell v Porter (1966) 115 CLR 666, Barwick CJ (with whom McTiernan J agreed (at 672)) said (at 670-671), when dealing with s95 of the 1924 federal bankruptcy legislation, which was a provision like those referred to in the preceding paragraph,
"[T]he debtor's own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time - relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor's inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency. Whether that state of his affairs has arrived is a question for the Court and not one as to which expert evidence may be given in terms though no doubt experts may speak as to the likelihood of any of the debtor's assets or capacities yielding ready cash in sufficient time to meet the debts as they fall due."
(See also the Bank of Australasia Case at 1528 (Griffith CJ) and 1542-43 (Isaacs J).)
[14] However, although the notion of a person's own money is to be treated in the expansive way just described (subject to what I say in the next paragraph of these reasons), it does not extend, most obviously, to money borrowed without security for the purpose of paying one's debts; for a discussion of the relevance to the question of corporate insolvency of the ability to pay one's debts only with borrowed, as opposed to one's own, money, see, for example, Lyford v Commonwealth Bank of Australia (1995) 130 ALR 267 at 276 (Federal Court of Australia, RD Nicholson J).
…
[17] In spite of the legislature's failure to include, in terms, in para52(2)(a) of the Act the language either of "when those debts become payable" or of "from the debtor's own money", the debtor nevertheless treated the paragraph before me as requiring that he prove an ability to pay, from his own money, his debts when they become payable. He did so by submitting: first, that, at the time of the hearing, he was required to and did satisfy the test of solvency set out in subs5(2) of the Act; and, secondly, that the test of solvency set out in subs5(2) of the Act "simply adopts the earlier test in Sandell v Porter".
[18] For the purpose of determining the present petition, I propose to act upon that construction of para52(2)(a) of the Act upon which the debtor proceeded before me. I do so, not only because of the debtor's approach, but also because two other Judges of this Court have also relied, in whole or in part, upon that construction and I have found no authority which is opposed to that construction. (The two other Judges of this Court to whom I am referring are Cooper J (see Re McVey; Ex parte Carswell and Company, unreported, 22 May 1996, at p11; Re Eather; Ex parte Palada, unreported, 30 May 1996, at p19) and Finn J (see Re Capel; Ex parte Caram Finance Australia Ltd, unreported, 9 April 1998, at p8).)
[19] (I add, however, that even if para52(2)(a) of the Act were to be construed as only requiring the debtor to prove an ability to pay his debts presently payable and that from any money, whether his own or other people's, it is clear that proof of the matter set out in para52(2)(a) of the Act does not entitle the debtor to the dismissal of the petition; it only enlivens the Court's discretion under subs52(2) of the Act to dismiss the petition: Sarina v Wollondilly SC (1980) 48 FLR 372 at 376-377 (Bowen CJ and CA Sweeney and Lockhart JJ). On the narrower construction of para52(2)(a) of the Act which I am hypothesising in this paragraph of my reasons, relevant considerations in the exercise of the discretion under subs52(2) of the Act would, in my view, nevertheless be whether the debtor also has the ability to pay debts becoming payable in the reasonably immediate future and whether the debtor has the ability to pay the debtor's debts from the debtor's own money. That being so, the two matters which I have just mentioned would remain of importance in the determination of the present petition, even on a narrow construction of para52(2)(a) of the Act. I will make further reference to the topic of this paragraph in para31 below.)
…
[31] Turning now to the debtor's ability to pay any debts becoming payable in the future, it is, in my view, incumbent upon the debtor, who bears the burden of persuasion on the question of his ability to pay his debts, to satisfy the Court either that no debts of his will become payable in the reasonably immediate future or that, if they will, he will be able to pay them. In that connection, there was evidence before the Court of at least one debt becoming payable by the debtor in the future. However, the debtor did not seek to establish either that it would not become payable in the reasonably immediate future or that, if it did, he would be able to pay it. His position in that respect was self-contradictory. Having expressly acknowledged in one breath an obligation to prove an ability to pay his debts when they become payable, he then submitted in the next that that obligation was one only to prove an ability to pay his debts presently payable, a proposition contrary to the highest authority (see para11 of these reasons). In any event, however, he did concede that the existence of debts becoming payable in the future was "a general discretionary matter" for the Court, by which I infer he was referring to the Sarina discretion and, in particular, to one of the considerations which I have said in para19 above to be relevant to the exercise of that discretion if para52(2)(a) of the Act were to be given a narrower construction.
The affidavit relied on by Mrs Jabbour includes detailed references to her financial circumstances and, in particular, the claimed ability of her and her family to pay the debt using the assets of family members. Specifically it is noted that there are two significant potential sources of funds. Mrs Jabbour’s affidavit of 18 April 2008 (Exhibit “R1”) demonstrates that her projected:
a)Outgoings for the next three months (from the date of the affidavit) were approximately $6,8364; and
b)Income for the next three months (from the date of the affidavit) was approximately $11,185.44.
The affidavit further demonstrates that Mrs Jabbour’s total assets were valued at approximately $496,747 and her total liabilities at approximately $7,000. Ms Thew contends in written submissions that the above estimated funds are available to Mrs Jabbour to pay her debts. They are not to be treated as being immediately available to her in the form of cash but extend to money that she can procure by sale of assets: Sarina, Re; Ex parte Wollondilly Shire Council.
The second source of funds referred to by Mrs Jabbour appears to be her half share in a property in Lebanon from legacy the estate of her late father. Again, the funds from the sale of the property are not immediately available to her but will be realised upon finalisation of the administration of the estate with the final quantum dependent upon the exchange rate at the time of transfer and distribution. I further acknowledge that these funds will not be available within three months from the date of the Mrs Jabbour’s affidavit and relevantly no reference is made to these funds in that affidavit. The property in Lebanon was revealed by Mrs Jabbour during cross-examination on the Wardell Road property:
Mrs Jabbour: Are you trying to say to me whether I’m going to buy his share or is he going to buy my share? Is that what you’re trying to say to me?
Mr Giagios: No, whether you and your husband have ever discussed changing ownership or a house so that you own it in proportions. For example that you own half and he owns half, or that you own one quarter…
Mrs Jabbour: When I get my money from overseas, from my dad’s will, I will decide whether I am going to have it all for myself or not. I’m just waiting for the money to come through. We are having a bit of a problem with it overseas because of my dad’s birth certificate. My dad passed away here.
Mr Giagios: Sorry?
Mrs Jabbour: My dad passed away here.
Mr Giagios: He has property overseas?
Mrs Jabbour: Yes, we have got problems with the birth certificate.
Mr Giagios: I see?
Mrs Jabbour: So once that money come I will buy the share or not, or whether he will buy my share.
Mr Giagios: When is that likely to be sorted out?
Mrs Jabbour: He was supposed to be finished last night but we’ve got problems with the birth certificate.
Mr Giagios: Is there any indication as to when that is going to be sorted out?
Mrs Jabbour: With God’s help, I hope by the end of November. (Transcript, pp.12-13)
I acknowledge the issues raised by Mr Giagios in his submissions in respect of Mrs Jabbour problems with liquidating her interest in the Wardell Road property, which is her only substantial asset. Her evidence strongly supports the view that liquidation of this asset is extremely unlikely because of the ownership structure with her husband and their mutual undertaking that the property be retained for the benefit of their children. The nature of these undertakings are vague; however, I am satisfied that the sale of this property is highly unlikely. The liquidation of any one of Mrs Jabbour’s remaining assets would be insufficient to satisfy the current debt.
However, I am willing to accept the strong family bond between Mrs Jabbour and her four children and that they display an esprit de corps in times of emergency or family hardship. It would appear that Mrs Jabbour would liquidate a number of her assets (other than her house) and pool her resources with that of her children:
Mr Giagios: Just so that I understand this correctly Mrs Jabbour, are you saying to His Honour that under no circumstances will you sell the house at Wardell Road to pay off this debt?
Mrs Jabbour: I don’t have to sell it, there is no need for me to sell it.
Mr Giagios: If his Honour decides otherwise; if he decides that you’ve got to pay this debt money
Mrs Jabbour: I will have to borrow money.
Mr Giagios: But you will not sell this asset, you will not liquidate this asset?
Mrs Jabbour: No, that’s my children, that’s my kid’s house not my house. I leave my kids what my parents left me. Our family sings for others who don’t. If we get into trouble we try and help ourselves. This is my children’s house. If worse gets to worse I’ll have to get my children to bring money until my dad’s money comes through.
Mr Giagios: So if we were to exclude that property from paragraph 11 of your affidavit, then you say to his Honour that you would be able to satisfy the debt by selling your car, some household contents and from the cash that you have available?
Mrs Jabbour: Yes. First I get my …
Mr Giagios: Also from your earnings?
Mrs Jabbour: Sorry?
Mr Giagios: Also from your income?
Mrs Jabbour: I will pay by instalment if I have to or my son James will borrow money for me and I will pay him back when my dad’s money comes through. (Transcript, p.19)
It appears to me that Mrs Jabbour is the matriarch of a family group willing to pool their resources in times of financial hardship. It is also not unreasonable to think that by adopting this arrangement, raising the amount of the debt would be achieved. It may involve short term borrowing against the major asset until the funds are fully covered by their own resources or sale of the property in Lebanon. I readily accept that although it is not possible to satisfy the outstanding debt by liquidating any individual asset other than the house, I can accept that by pooling the family assets Mrs Jabbour is able to pay the amount expressed in the Creditor’s Petition. There has been no reference to any claimed part repayment and this issue has not been ventilated before the Court.
In relation to the Court’s discretion pursuant to s.52(2)(a) of the Act, I am satisfied that the material before me sufficiently establishes that Mrs Jabbour is solvent and a sequestration order against her should not be made. It needs to be remembered that proceedings of this kind are not debt recovery proceedings and involve the issue of redressing personal insolvency. I am satisfied on the material before me that this debtor has established, in discharging the onus upon her, that she is able to access funds available to her. Although the funds are not limited to cash resources, I am satisfied that she has an ability to access funds by mortgage and pool the family’s resources to meet her debt. I am not satisfied that the requirements of s.52 of the Act have been met and, in my view, a sequestration order against Mrs Jabbour should not be made.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 14 November 2008
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